AvalonBay Selling Sunset Towers Apartments in San Francisco

AvalonBay Communities is trimming its San Francisco holdings with the sale of twin apartment towers near Golden Gate Park.

Bridge Capital Partners is under contract to buy the Sunset Towers residences at 6-8 Locksley Avenue for an undisclosed price, the San Francisco Business Times reported. AvalonBay listed the 243-unit property earlier this year and was reportedly fielding bids north of $100 million. The deal for the multifamily complex is expected to close in January.

The sale serves as evidence of a citywide rebound in the apartment market as demand for units rises. Multifamily investment volume is up more than 35 percent year-over-year, and absorption has returned to 2022 levels, per Avison Young data cited by the Business Times.

Because San Francisco is seeing few new market-rate projects across the city, investors have been focusing on existing properties in supply-constrained neighborhoods, such as the Inner Sunset where Sunset Towers is located. More than 20,000 units in San Francisco are in a holding pattern as projects face years of delays or collapse entirely. Last year, only 1,453 residential units were completed and plans were filed for 2,541 new homes, down from more than 5,000 delivered in 2020, according to the San Francisco Planning Department.

Both demand and rents have been increasing in San Francisco — a trend that AvalonBay COO Sean Breslin attributes to a surge in tech workers moving to San Francisco as the artificial intelligence sector booms.

“AI is certainly a big part of that,” Breslin said in May of the upward pricing momentum. AvalonBay president and CEO Benjamin Schall told investors in September that sales across its portfolio could increase as rents and property values increase. On the company’s third-quarter earnings call, AvalonBay executives reaffirmed that demand in coastal markets like San Francisco is driven by highly educated, higher-paid workers in AI and related fields.

AvalonBay owns nearly 3,400 apartments in San Francisco with a total value of about $1.2 billion.

— Chris Malone Méndez