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San Francisco's Multi-Housing Market to Remain Among the Strongest in 2015

Thursday, July 23, 2015

San Francisco produced cumulative rent growth of 45.2 percent from 2010-2014 and remained among the top five multi-housing buildings and apartment markets in the U.S. throughout that period.

The metro’s multi-housing buildings market remained one of the strongest in the nation with a job growth of 2.8 percent in 2014, about 100 basis points (bps) above the national average of 1.8 percent. Job growth is expected to increase further by 3.3 percent in 2015, though effective rent growth will moderate somewhat because of increase in new supply.

Axiometrics noted, “the Bay Area as a whole is the strongest apartment metropolis in the United States. The tech and construction industries are driving job growth and are attracting young, highly-paid new residents. San Jose and Oakland apartment markets also are very strong -- San Jose because of the tech industry and Oakland because of its lower rents and limited new supply.”

San Francisco Multi-Housing Development

Demand for multi-housing buildings in San Francisco outpaced new apartment supply by approximately 1,000 units in 2014, when 4,745 new units were delivered. New apartment supply of 4,430 units will outpace demand by close to 2,100 units in 2015.

Multi-Housing Building Occupancy & Absorption

Occupancy in San Francisco ended 2014 at 95.8 percent, 50 bps from the metro’s long term average occupancy rate of 95.3 percent. Absorption is expected to moderate from 5,711 units in 2014 to 2,145 units in 2015.

San Francisco’s high multi-housing buildings occupancy rate is largely driven by Class A properties, which in November 2014 had an occupancy rate of 97.1 percent. Class B properties were 50 basis points behind with an occupancy of 96.6 percent, whereas Class C was 310 bps behind Class A with an occupancy of 94 percent.

San Francisco OccupancySan Francisco Completions and Net Absorption 

Rental Rates for Multi-Housing Buildings

San Francisco's effective rent growth has outperformed the 1997-2014 average of 4.1 percent each year since 2010. Effective rent growth was 9.7 percent in 2014, and is forecast to remain strong but lower at 4.4 percent in 2015. Rent growth in future years is expected to moderate gradually toward the 1997-2013 average.

In November 2014, Class A outperformed Classes B and C in effective rent growth. Class A apartments had an average effective rent growth of 8.4 percent, whereas B and C had 8.2 percent and 8.1 percent respectively.

San Francisco Rental RatesSan Francisco Annual Rent Growth 

Contact HFF San Francisco for more information regarding multi-housing properties on the market in this area.

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