The Rise of Multifamily Housing in San Francisco: A Hot Market Amidst Soft Residential Sales
Sep 25, 2025
The Rise of Multifamily Housing in San Francisco: A Hot Market Amidst Soft Residential Sales
San Francisco, known for its iconic Golden Gate Bridge and vibrant cultural scene, is witnessing a significant shift in its real estate market. While residential sales have remained soft, the multifamily housing sector is experiencing a surge in demand.
Multifamily Housing: The New Hot Market
The multifamily housing market in San Francisco has become increasingly attractive to investors and developers, with vacancy rates at its lowest levels since 2019. Several factors contribute to this trend:
- Urbanization and Population Growth: San Francisco continues to attract a diverse population, including young professionals, tech workers, and families. The city’s urbanization and population growth have driven demand for multifamily housing, which offers a more affordable and flexible living option compared to single-family homes.
- Affordability Concerns: The high cost of single-family homes in San Francisco has made homeownership unattainable for many residents. Multifamily housing provides a more affordable alternative, allowing individuals and families to live in desirable neighborhoods without the financial burden of purchasing a home.
- Lifestyle Preferences: The shift towards urban living and the desire for amenities such as gyms, communal spaces, and proximity to public transportation have made multifamily housing an appealing choice. Many residents prefer the convenience and community-oriented lifestyle that multifamily developments offer.
The Office Market Comeback and Its Impact on Rentals
The resurgence of the office market in San Francisco has had a notable impact on the rental market. As businesses reopen and employees return to in-person work, the demand for rental properties has increased. This resurgence can be attributed to several factors:
- Return to Office Work: With the easing of pandemic-related restrictions, many companies are transitioning back to in-office work. And while the tech sector experienced layoffs in 2023, the San Francisco metropolitan area’s employment was up 0.5% year over year as of November 2024, according to the U.S. Bureau of Labor Statistics. This shift has led to an influx of employees seeking rental accommodations near their workplaces, driving up demand for multifamily housing.
- Corporate Relocations: San Francisco remains a hub for tech companies and startups. As businesses expand and relocate to the city, the demand for rental properties has surged. Employees moving to San Francisco for work are contributing to the increased demand for multifamily housing.
- Hybrid Work Models: While remote work remains prevalent, hybrid work models are becoming more common. Employees who split their time between home and the office often prefer renting in urban areas to maintain proximity to their workplaces. This trend has further fueled the demand for multifamily housing.
Rising Rents: A Consequence of Increased Demand
The increased demand for multifamily housing, coupled with the office market comeback, has led to rising rents in San Francisco. Several factors contribute to this trend:
- Limited Supply: The supply of multifamily housing has not kept pace with the growing demand. The limited availability of rental units has allowed landlords to increase rents, capitalizing on the high demand.
- Competitive Market: The competitive rental market has driven up prices as prospective tenants vie for limited rental properties. Bidding wars and higher rental offers have become common, further pushing up rents.
- Investment Opportunities: Investors and developers are capitalizing on the lucrative multifamily housing market. The potential for high rental yields and property appreciation has attracted significant investment, contributing to rising rents.
The multifamily housing market in San Francisco is experiencing a surge in demand, driven by urbanization, affordability concerns, and lifestyle preferences. The comeback of the office market has further fueled this demand, as employees seek rental accommodations near their workplaces. As a result, rents are on the rise, reflecting the competitive and dynamic nature of the city’s rental market. San Francisco’s real estate landscape continues to evolve, with multifamily housing emerging as a hot market amidst soft residential sales.
Written by: Hans Hansson
Hans Hansson is the President of Starboard Commercial Real Estate. Hans has been an active broker for over 35 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email [email protected] or call him at (415) 765-6897. You may also check out his website, https://www.hanshansson.com