Yardi Matrix: San Francisco, Investor Haven?

San Francisco continues to be an economic powerhouse, among the top metros in the U.S. in job creation and home to many iconic brands and technology companies such as Apple, Google and Twitter.
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San Francisco continues to be an economic powerhouse, among the top metros in the United States in job creation and home to many iconic brands and technology companies such as Apple, Google and Twitter. Nearly half of all venture capital invested in the United States is invested in the Bay Area.

The growth of skilled jobs and influx of young professionals has created a demand for housing that is transforming neighborhoods and pushing rents to extreme highs. Lack of affordable housing is not only impacting the urban core but pushing workers to outer suburbs. More than 20 percent of the region’s workforce commutes above 45 minutes, while BART ridership has risen 55 percent since 1998, reaching its capacity during peak commute times. To meet demand for housing, development is surging, with 22,000 units under construction and more than 62,000 units planned. Still, the new units can’t come fast enough, and the city’s stringent zoning laws may prevent development from achieving needed levels.

While the situation may be untenable for many low- and middle-income renters that are choking on rate increases and being forced out of formerly affordable neighborhoods, the Bay Area is a haven for real estate investors. Property values are soaring; rents rose 10.5 percent in 2015, and our forecast calls for another year of double-digit gains as demand outstrips supply. The rapid escalation may be unsustainable, but the cooling off is likely to come after 2016.

Read the Yardi Matrix Report.