REAL ESTATE NEWS

San Francisco's multifamily environment overall has strengthened meaningfully as vacancy continued to tighten and demand remained elevated.

The metro's vacancy rate fell to its lowest level in roughly a decade in March, supported by a surge in net absorption that has outpaced the limited amount of new supply entering the market.

During the past year, the metro absorbed 3,200 units, while deliveries totaled about 1,500, pushing vacancy down to 4.1% and keeping availability well below the national average.

Several forces are driving a rebound in leasing, according to Nigel Hughes, senior director of market analytics at CoStar Group.

Population growth has resumed, with the metro enjoying 1% year-over-year growth to 1.6 million residents, reversing several years of contraction. High household incomes exceeding $150,000 continue to support rent levels. Tech employment remains a stabilizing factor despite broader job losses and one market participant emphasized that return-to-office policies and hiring within AI-focused firms are primary demand drivers.

Another significant renter churn noted was linked to layoffs and relocation activity, particularly from the East Coast and Los Angeles.

But perhaps what was most impressive was the rent growth, as March extended the city's sharp rebound over the past year. Strong tenant demand, limited new supply and substantial growth in the AI and tech sectors have pushed the market to the top of national rankings for rent gains. Average monthly asks reached $3,460, nearly double the U.S. average, while annual rent growth accelerated to 6.8%, the fastest among major U.S. markets.

CoStar's San Francisco metro market includes both San Francisco County and San Mateo County. Isolating just San Francisco County, rent growth is currently at 8.3%.

Hughes told GlobeSt.com that several San Francisco submarkets stand out for exceptional performance.

For example, Mission Bay/China Basin posted the strongest annual rent growth at 14.1%, with average asking prices reaching $4,495 per unit. South of Market followed closely with 14.7% annual growth and average rents of $4,147 per unit, underscoring both areas' popularity among tech workers.

Also, Downtown San Francisco posted solid gains of 7% year-over-year, while Civic Center/Tenderloin saw a 5.9% increase as improving safety conditions bolstered demand.

High-end buildings are setting the pace for rent growth, with four and five-star properties leading the market with 9.6% annual rent growth, achieving asks of $4,430 per unit, supported by heavy interest from high-income renters returning to the city.

Newer luxury properties have demonstrated particularly strong pricing power, with recently completed projects quickly reaching near-full occupancy.

For the U.S. as a whole, CoStar reported that apartment rents increased modestly in March by 0.2% month-over-month to $1,723. This marks the fourth consecutive month of positive gains, following a period of flat-to-declining monthly performance in the second half of 2025. On an annual basis, rent growth eased slightly to +0.4% in March 2026, down from +0.5% in February and from +1.5% a year earlier.

Source: GlobeSt/ALM