Q1 2025 San Francisco Multifamily Market Report

San Francisco Multifamily Market Overview

Multifamily demand increased throughout San Francisco, due to a population influx that added more renters to the market. New residents have flocked here for growing tech employment opportunities, as well as the latest efforts by the City of San Francisco to improve safety concerns in the metro. The first quarter followed the trend of increased absorption in 2024, with 1,000 units absorbed. Absorption activity has been greatest in San Francisco’s southern submarkets—particularly Mission Bay, San Mateo, and Redwood City. San Francisco continued to see increasing rents in the first quarter with the average rent growth rate rising to 2.8%, the highest yearly increase since the second quarter of 2022.

• The South of Market area may record some new activity moving forward with 25 proposed projects that would total more than 5,000 units if delivered.
• The Quincy will be the largest delivery for 2025 as it will add 501 Class A units to the Mission Bay submarket upon completion in September.
• Institutional investors made their way back to the metro, accounting for three major sales.
• Employment in the AI segment is driving new job opportunities as many developing AI companies are moving here.

Rents | Vacancy | Construction

Due to consistently high demand levels, the vacancy rate dropped to 5.3% in Q1 2025. Residents have been most attracted to mid-tier apartments, with the vacancy rates for Class B and C properties at 4.7% and 4.5%, respectively. Asking rents for these segments range from $2,400 to $3,000 per unit. With the increase in residents, construction has picked up, and the highest level of construction is occurring in southern parts of the metro. The San Mateo, South San Francisco, and Redwood City areas are seeing the most new activity, due to demand and their proximity to life science employers.

Apartment rent in San Francisco’s Mission Bay neighborhood saw the biggest increases over the past year, averaging 6.4%. New apartments in the area, such as The Canyon and Verde at Mission Rock, have proven popular with renters. Notably, the South of Market neighborhood saw average rent increases of 4.5%, and rents in downtown San Francisco increased by just 2.3%. The upward momentum in San Francisco’s apartment rents will continue in the quarters ahead, with average rent projected to increase by more than 4% throughout the rest of the year.

Sales

Investments slightly decreased from the end of 2024 and recorded a total sales volume of $734 million for Q1 2025. The largest sale this quarter was for The Plaza, located in the Pilgrim-Triton submarket. The Plaza is a Class A property that is made up of 307 units, and it sold for $161.4 million in February. Currently, the average sale price per unit is over $400,000, which decreased from Q4 2024. Meanwhile, cap rates on transactions recorded an uptick. The 4.6% cap rate recorded in Q1 2025 is a slight rise from year-end 2024, and is forecast to remain in this range for the rest of 2025.