Luxury Rental Bidding Wars in San Francisco

Bay Area real estate news was heavily focused on San Francisco this week, with rental agents explaining the reasons behind the city’s “absolutely insane” luxury rental market, part of the bigger upswing for rentals over the last year.

Zumper defines “luxury listings” as studios through four-bedroom units that are in the top 75th percentile for price, according to the listing site’s spokesperson Crystal Chen. Overall median rent for these top-tier units in San Francisco as of May 2025 was $5,595 a month, up about 9.7 percent year-over-year. That makes sense given that rental rates for San Francisco one- and two-bedroom apartments at any price point are up 11.9 percent and 14.2 percent, respectively, in the same period, she said.

In the premier neighborhoods on the city’s north side, a lack of “modern and new and sexy” rentals with outdoor space and privacy has been leading to frenzied competition when something that does tick all the boxes hits the market, according to Compass leasing agent Inna Rubinchik. The rents on all of her luxury listings were bid up this year, she said.

“If you want to make a lot of money, if you really want to maximize the rent on your property and bring it up to snuff, make it sexy, make it exciting because you’ll be in a league of your own,” Rubinchik tells her owner clients. “You’re not going to have any competition whatsoever.”

Demand is also up downtown, according to Shalini Sadda, a leasing agent with City Real Estate. Many of these downtown renters are reacting to return-to-office mandates or relocating due to some connection with the growing artificial intelligence scene in the city, she said.

“We’re expecting a lot of AI companies to take possession of office spaces downtown, which triggers people wanting to live and work closer to their offices,” Sadda said.

Prologis pursues Caltrain development

Prologis will soon file plans for a 7-million-square-foot redevelopment of San Francisco’s Caltrain railyards at 4th and King Streets that could add between 1,500 and 4,000 homes to SoMa, the San Francisco Business Times reported.

The centerpiece of the 20-acre development would be an 850-foot mixed-use tower, with other lower high-rises as well. Affordable housing units are planned, though specific details are still unknown. Beyond the residential components, plans also include office space, parks, restaurants and a new train station.

Prologis got the site in 2005 through a nearly $5 billion deal to acquire Catellus Development, the largest landowner in Mission Bay at the time. The project would be the second-densest transit-focused development after the Transbay Transit Center a few blocks to the northwest. A San Francisco Planning Department timeline estimates approvals could be secured in 2027 with construction beginning the following year.

“As you can imagine, it’s early in the process,” Mattie Sorrentino, a spokesperson for the company, told the Business Times. “Right now, we’re focused on community engagement and the entitlement process.”

Sneak peek at first Treasure Island condos

The Treasure Island Development Group will kick off sales on its first Treasure Island condo project this fall, ending the first phase of the decades-long 8,000-unit redevelopment.

Treasure Island Development Group, a partnership between Wilson Meany, Stockbridge Capital Group and Lennar, shared exclusive details on the six-story, 148-unit 490 Avenue of the Palms with The Real Deal.

The mid-rise will be fronted by the master planned community’s new Cityside Park, which Wilson Meany’s managing partner, Chris Meany, said would be the island’s “version of a Crissy Field-like waterfront park experience” and is also set to open this fall.

In addition to the direct access to open space, the luxury building has protected waterfront views, creating a “front-row relationship to the Bay and skyline that simply doesn’t exist elsewhere in San Francisco,” Meany said.

Polaris Pacific has been hired as the exclusive sales and marketing partner. Prices will not be shared until closer to the start of sales this fall, with move-ins anticipated in late 2025.

But Pacific Polaris Partner Paul Zeger did tell TRD that prices will “reflect the rarity of what’s being offered”: brand new construction along the city’s newest waterfront park, with “one-of-a-kind views that won’t be repeated.”

Being the first for-sale project on Treasure Island is “both a blessing of opportunity and a challenge,” Zeger added. “It requires the vision to appreciate what is still forthcoming to the island.”

The new offering also comes during a still-challenging time for the city’s condo market. The inventory of new and resale condos in San Francisco is higher than it was before the pandemic, according to Polaris’ May market report, but has been dropping each year since peaking in 2022.

Peninsula Land to pick up another discounted SF office tower

Roger Fields’ Peninsula Land and Capital firm appears to be growing its office holdings in San Francisco, according to the San Francisco Business Times.

The Palo Alto-based investor is in talks to acquire 505 Montgomery Street, about a block from the Transamerica Pyramid, from an affiliate of German asset manager DWS. The deal purportedly hasn’t closed yet, but at the rumored $300-per-square-foot price, the agreement would value the 24-story, 344,000-square-foot tower at upwards of $100 million. That price is believed to be contingent on whether or not the building’s largest tenant, law firm Latham & Watkins, would extend its 117,000-square-foot lease past 2028.

In 2023, Fields paid a much lower price for 550 California Street, just across the street from 505 Montgomery. Peninsula Land paid seller Wells Fargo $40.5 million, or about $115 per square foot, for the 365,000-square-foot building that was totally empty at the time. Since then, occupancy has jumped to 82 percent — better than the average vacancy rate in the city overall, where about one in three offices are still vacant despite the uptick in interest from AI, which has been putting increased pressure on the market.

Values still down at Millennium Tower, despite fixes

Even after millions spent on foundational improvements, buyers are still hesitant about investing in San Francisco’s Millennium Tower.

The 58-story skyscraper, located at 301 Mission Street in SOMA, was beset by bad press after news surfaced in 2016 that the luxury condo building was tilting and leaning. Now, almost a decade later and with foundational fixes made, resellers in the building are still seeing substantial losses, according to The Wall Street Journal.

Values across nearby high-rise residential buildings downtown have also seen price declines since the pandemic, and this spring has also been particularly challenging due to uncertainty over tariffs, so the trend is not simply related to issues specific to the building.

That said, of the nine sales at Millennium Tower that have closed so far this year, sellers lost an average of about 20 percent compared to what they originally paid for their units, according to the Journal.

Some owners in previous years saw even bigger losses. One unit on the fifth floor sold last year for $720,000, down 52 percent from what the seller paid for it in 2015. In 2022, another resident sold a unit on the 54th floor for over $2.7 million — a loss of nearly 37 percent from the $4.3 million purchase price in 2012.