San Francisco’s multifamily market posted a strong performance in Q4 2025, marked by tightening vacancy and accelerating rent growth. Robust demand, driven by renewed population growth, AI-sector expansion, and increased return-to-office activity, has continued to outpace new supply, pushing the vacancy rate down to 4.6%, its lowest level since 2014. Annual net absorption reached 3,400 units, one of the highest levels of the past decade, while only 311 units were delivered during the quarter. This imbalance has fueled rent gains, with average asking rents climbing to roughly $3.3K per unit and annual rent growth reaching about 5.7%–5.9%, the fastest pace in the nation. Demand has been especially strong in Class A properties and in neighborhoods such as Downtown San Francisco, Mission Bay, and South of Market, where luxury rents are rising most rapidly.

 

Overall, Q4 2025 reflects a clear turnaround from the softer conditions of the early 2020s, with tightening vacancies and rising rents signaling renewed strength in the city’s apartment market.

 

Key Findings

• San Francisco now has the fastest rent growth in the U.S., surpassing the prior 2019 peak; growth is strongest near AI employment hubs such as Mission Bay and South of Market.
• Apartment demand has accelerated sharply over the past year while new construction remains limited, pushing vacancy down to 4.6%, the lowest level in a decade, and driving net absorption of 3,400 units, matching mid-2010s peak levels.
• Expanding AI investment, office leasing, and hiring, along with stabilizing population trends and improved downtown safety, are revitalizing apartment demand across submarkets, with further rent pressure likely as supply constraints persist.

 

San Francisco Multifamily Supply & Demand Dynamics

Source: CoStar Group, Inc.

 

San Francisco Demographics

Source: CoStar Group, Inc.

• Unemployment Rate: 3.9%
• Current Population: 1,592,722
• Households: 659,771
• Median Household Income: $154,140

 

San Francisco’s economy is showing early signs of recovery, led by a surge in AI investment and a return to population growth. Billions of dollars in funding have flowed to AI startups, driving new office leasing and hiring as demand for advanced applications expands across industries. The metro’s population grew 1.2% in 2025 while unemployment stands at 3.8%. Professional and business services remain the largest employment sector, complemented by a highly concentrated information sector anchored in tech and AI. While recent trends suggest a turning point for office demand, ongoing risks, such as tech volatility, interest rate uncertainty, and affordability challenges, mean sustained recovery will depend on continued infrastructure investment and downtown revitalization.

 

Major Tech Companies in San Francisco

Source: CoStar Group, Inc.

• Apple
• Meta
• NVDIA
• Alphabet

 

Population, Labor Force, & Income Growth

Source: CoStar Group, Inc.

 

San Francisco Multifamily Construction

Construction activity remained subdued in Q4 2025, reinforcing the widening gap between strong renter demand and limited new supply. Only about 2,800 units were under construction at year-end, roughly 1.5% of existing inventory and well below the five-year average, while just 311 units were delivered during the quarter. Elevated construction costs, tighter financing conditions, and lingering caution following the post-pandemic downturn have constrained development, even for permitted projects. As a result, recent completions have been concentrated in the luxury segment and increasingly located in Peninsula submarkets such as San Mateo and Redwood City rather than within San Francisco proper. The lack of new construction in Q4 2025 has been a key factor supporting rising rents and tightening market conditions, though improving rent growth is gradually restoring developer confidence heading into 2026.

 

Units Construction Starts

Source: CoStar Group, Inc.

 

Units Under Construction

Source: CoStar Group, Inc.

 

San Francisco Multifamily Sales

Investment activity showed renewed strength in Q4 2025, building on momentum that began in late 2024. Transaction activity during the quarter contributed to a trailing 12-month sales volume of approximately $2.6 billion as of early 2026, with Q4 closings reflecting improving investor confidence. Properties traded at an average price of about $529,000 per unit, with cap rates near 4.5%, while institutional and REIT buyers accounted for roughly half of total volume, a notable shift from the investor mix of recent years. Although smaller Class C assets continued to dominate deal count and traded at more modest pricing, sentiment improved as sale prices stabilized and cap rates leveled off.

 

Overall, limited development capacity, tightening vacancy, and strong rent growth expectations supported a more active investment environment in Q4 2025, positioning the market for further recovery in 2026.

 

San Francisco Multifamily Sales Volume

Source: CoStar Group, Inc.

 

By the Numbers

Q4 2025 | Source: CoStar Group, Inc.

• Sales Volume: $388M
• Price Per Unit: $529K
• Cap Rate: 4.5%
• Vacancy Rate: 4.6%
• Rent Growth: 5.9%
• Asking Rent Per Unit: $3.3K
• Units Under Construction: 2.8K
• Units Delivered: 311
• Units Absorbed: 189