Winners, losers in San Francisco’s rental recovery

It’s a tale of two cities in San Francisco’s rental market as some neighborhoods are back to their pre-pandemic rental rates while others are still nearly 25 percent off, according to rental data from Zumper.

In June 2022, the median rent for a one-bedroom apartment in the city was up to $3,000 for the first time since the pandemic began, according to the rental listing site, another clear sign of an overall rental market recovery. But a more granular neighborhood breakdown shows that some areas have much higher demand than others more than two years after the pandemic led to pandemonium in the city’s multifamily sector.

By June 2021, rents in nearly every neighborhood in the city were still down double-digits compared to June 2019. The Marina was one of the best performing neighborhoods at the time with only a 9 percent drop; it is now within $20 of its pre-pandemic median rent of $3,281 a month. Cole Valley, Haight Ashbury and NOPA are also more or less back to pre-pandemic rents this month, according to Zumper’s Crystal Chen.

“Those are all very central and family-friendly neighborhoods, making them very desirable,” she said via email.

The return of renters has had a direct impact on values for apartment buildings in the more popular neighborhoods. An apartment building in NOPA with a $20 million ask may be SF’s biggest multifamily deal of the year when it closes next month. Listing agent Allison Chapleau of Vanguard Commercial said the 42-unit building overlooking Alamo Square has had no trouble attracting tenants, with its only empty unit filled within three days.

Other neighborhoods may still be off their pre-pandemic values, but have seen a major turnaround in the last year. Pacific Heights and Cow Hollow, two northern view neighborhoods close to the Marina, saw one-bedroom rents rise 8 percent and 11 percent, respectively, between June 2021 and June 2022. Both are both back over the $3,000-a-month mark.

SOMA is up 13 percent in that period and currently commands the highest rent in the city at more than $3,500 a month, compared to about $3,850 three years ago. That does not take into account the months of free rent now offered by leasing agents in new-construction high rises in the area in order to bring tenants back downtown, even as many offices are still figuring out their return-to-work policies.

“They are throwing out all kinds of incentives to get those filled,” said leasing agent Dave Chesnosky, founder of Renting SF.

The city’s northern neighborhoods have always been popular, he said, but before the pandemic people didn’t want to add an extra 30 minutes to their commutes downtown or on a tech shuttle bus or Caltrain. Today’s renters are expecting to have to go into an office only one or two days a week, said Chesnosky, so they’ll take longer commutes if it means they can live in a bigger place and still walk to neighborhood amenities such as a popular shopping and restaurant strip, parks and the waterfront.

“Tenants tell me, ‘I used to live in SOMA to be close to the train,’” he said. “‘Now I don’t have to.’”

The lack of consistent office reopenings and the subsequent change in tenants’ perspectives has had a big impact on downtown neighborhoods, particularly the Financial District, where rents fell 25 percent, or nearly $900 a month, between June 2019 and June 2021. Over the last year, rents in the area near the beginnings of Market and Mission streets went up less than 1.5 percent, “which makes sense considering the low office occupancy rate in SF right now,” Zumper’s Chen said.

The Mission also saw a 23 percent drop — from approximately $3,500 in June 2019 to about $2,700 in June 2021 — and hasn’t shown much upward momentum in the last year. Its median one-bedroom rent went up about 1 percent in that time. The area’s southern location not far from downtown had been appealing to those who needed to get to work downtown, as well as those commuting to Silicon Valley.

Chesnosky is looking for renters for a four-bedroom condo in the Mission, right in the heart of the 24th Street commercial corridor. In 2018, he rented the unit for $7,000 a month. It’s now on the market for $6,000, with no takers yet.

He’s also renting out a four-bedroom in Cow Hollow, which he listed for $6,500, about the same as its pre-Covid rents. Two groups of roommates applied and it was rented within the week, he said.

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