This report separates out the 2-4 unit and the 5+ unit apartment building markets in the 3 counties, since they have somewhat different dynamics and values.
Median Sales Prices & Average Dollar per Square Foot
by County and San Francisco Submarket
Annual Trends in Values:
Chart: Annual Median Price Trends, 5+ Units
Chart: Annual Median Price Trends, 2-4 Units
Chart: Annual Dollar per Square Foot Trends, 5+ Units
Chart: Annual Dollar per Square Foot Trends, 2-4 Units
Market Sales Overviews
Chart: 2016 Sales by Price Segment, SF 5+ Units
Chart: 2016 Sales by Price Segment, SF 2-4 Units
Chart: Marin Overview, 2010-2016
Rent Rate Statistics
According to Zillow, median list rents ticked up in early 2017 from the 4th quarter of 2016, reversing previous quarters of decline, but still well down from 1 year ago. However, the data is still too short-term to jump to any strong conclusions and we will provide updates as more data becomes available. For the past year, San Francisco rents, in particular, have been under significant downward pressure from the large surge of new apartment units coming on market, and reports from the field paint a relatively clear picture of increasing supply and some softening of demand in comparison to the frenzy of previous years.
San Francisco still has the highest median list rent in the nation, though New York has higher median rental dollar per square foot values in 2 of the 3 categories delineated in the second chart below.
Note: There are different ways of measuring average and median rents, and, frankly, none of them is definitive: They are usually based on advertised rates or relatively small samples from selected properties, as determined by different analytic firms or rental websites. Still, whoever is doing the analysis, longer-term trend lines usually tend to more or less paint similar pictures of the rental market.
This next chart looks at Weighted Average Asking Rents (another method of analysis) for Q1 of each year for a longer-term perspective. Q1 2017 estimated based on available data.
Valuation Metrics by County & San Francisco Submarket
Cap Rates, Gross Rent Multiples & Price per Unit
Preliminary indications in San Francisco are that cap rates are starting to tick up a tiny bit, and gross rent multiples are starting to tick down a bit, albeit from peak levels reached after 5 years of extremely strong markets. Cap rates in Alameda County, for the time being, appear to still be moving lower, but yet remaining significantly higher than in the city or in Marin.
Annual Trend Overviews:
Chart: Annual Cap Rate Trends
Chart: Annual SF Gross Rent Multiple Trends
San Francisco Market Dynamics
Annual Trends, 2010 – 2016
In each of these four statistical measurements of market heat, there is an indication of some degree of market cooling occurring in the San Francisco multi-unit markets in 2016. However, so far, the changes are generally relatively small and not wholly consistent across the different building types measured.
Long-Term Appreciation Trends in 2 Major Areas
of San Francisco
Looking at the 2-4 unit markets in two broad sections of the city, the northern prestige neighborhoods and the highly sought-after central Noe, Eureka & Cole Valleys district, indicates continued dollar per square foot appreciation in 2016. We use the 2-4 unit markets because the greater quantity of sales makes the statistics more reliable.
Q1 2017 Sales of San Francisco 5+ Unit
San Francisco is a unique residential-investment market: the buildings are smaller and older than in most places, built in a wide range of architectural styles. The great majority of the market is under rent control, which makes upside rental-income potential a big component of valuation, even if it is unknown when that potential might be realized. Furthermore, the units are typically very unlike those in suburban garden-apartment complexes, and within the city the variety in buildings and units is enormous.
In real estate, the devil is always in the details: If you are interested in further insight into the details of any of the above sales, or regarding properties currently on the market, please contact me.
Broker Performance in
Residential Multi-Unit Property Sales
According to Broker Metrics, which crunches MLS sales data, of the largest brokerages in San Francisco for multi-unit residential property sales, Paragon ranks first for highest sales volume (in both 2+ and 5+ unit sales).