San Francisco rentals make gains, still last market lagging behind pre-pandemic numbers

San Francisco is the last metro area still lagging behind its pre-pandemic rental rates, according to a new report from ApartmentList. That makes the city a major outlier in a red-hot national rental market where rents are up over 16% in the last year and some areas, including Miami, Phoenix and Las Vegas, are posting rents more than 30% beyond March 2020 rates.

Rents for one- and two-bedroom apartments in the San Francisco metro area are still 2% below that critical month, when the city was the first in the nation to enact strict shelter-in-place restrictions to slow the spread of COVID. Yet even coming close to pre-lockdown figures marks a dramatic recovery from the depths of the pandemic, when rents were down by more than a quarter and multifamily owners were desperate to staunch the flow of tenants fleeing the city.

Rents in the San Francisco metro area, which includes the East Bay and the Peninsula, were up just over 12% in April compared to one year ago, and have been on the rise for the last four months straight, according to the ApartmentList report. It pegged median rents in the city proper at $2,386 for a one-bedroom apartment and $2,761 for a two-bedroom, about twice as expensive as the national average.

The site does not track rents for studio apartments, but a recent survey from Realtor.com shows that smaller units have proven less popular with renters in tech hubs nationwide as people continue to prioritize privacy and space, particularly as some degree of remote work is expected to continue indefinitely. The bigger-is-better trend is particularly apparent in the San Francisco metro (which for Realtor.com includes the East Bay but not the Peninsula) where median studio rents in March 2022 were more than 13 percent below March 2020.

Studio rents in the city are “still softer,” agreed Clinton Textor, senior vice president of multifamily for Marcus & Millichap in San Francisco, but have “rebounded nicely over the past few months.” Overall, he said, the city is clearly on an upswing as offices around the bay are reopening and people once again need to consider commutes in their housing decisions.

“The city is open once again and we are seeing life return to the streets,” he said. “The tech buses are running again. I expect rents to continue to rise.”

Textor added that rising interest rates, which have had very limited impact on San Francisco’s residential market thus far, have now overtaken rents as the biggest concern for multifamily buyers.

“One buyer told me last week they are ‘white knuckling’ the capital markets right now,” he said. “Rents are great, but interest rate risk is now the thing everyone is talking about. Rates require us to move more quickly to modify pricing than anything else because they affect the bottom line so much.”

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