San Francisco Apartment Rents Resume Downward Decline (Copy)

San Francisco’s multifamily rents resumed their downward spiral in September and October, which wiped out the rent gains made in the previous six months of 2023.

Average rents, which in September fell 0.5% below their August level, dropped another 0.8% in October. That totals a year-over-year decline of 1.6%.

During this time of year, average rents often drop, but typically the seasonal drop arrives after rising during the spring and summer leasing season, when tenant demand soars and landlords can secure strong rent increases.

However, 2023 saw a moderate spring-summer leasing season in San Francisco. The lack of demand can be attributed to the ongoing resident population decrease, reduction of workers returning to offices and lackluster tourist activity. Toss in the challenging economy for renters, high interest rates and job layoffs which creates a perfect storm for apartment renters.

High-end apartment buildings account for a bulk of the rent decrease in the past two months. Average rent for four- and five-star-rated buildings slipped 2.2% year over year. The luxury segment continues to suffer high post-pandemic vacancy rates, with an average vacancy of 9.6% in San Francisco. The continuing lack of demand forces landlords to entice renters with favorable lease deals.

San Francisco doesn’t stand alone with subdued rent growth. Multifamily rents have flattened or fallen in many other national markets. Some markets, such as those in the Sun Belt, feel the effects of historically high levels of new construction, while other markets suffer more from the impact of the continued economic pressures. San Francisco doesn’t suffer from over-supply, and many expect that demand will pick up as the economy improves over the next year.