top of page
  • Writer's pictureCapital Bridge Partners

Time to Buy San Francisco Multifamily?

Updated: Nov 19, 2023

By Connor and Daniel | Capital Bridge Partners

As an iconic city known for its rich cultural diversity, booming tech scene, and stunning geography, San Francisco has taken its place amongst world-class cities in the historically strong multifamily investment market. As we move through the third quarter of 2023, signs point towards a unique window of opportunity to invest.

Lower Property Prices and Increased Negotiating Power

One of the most significant trends in San Francisco's multifamily market this year has been the dip in property prices. The average price per unit fell to $353,000 - a low point not seen since 2010, immediately following the Great Recession. While this decrease may be attributed to a variety of factors including the Fed’s interest rate hikes and a pullback in bank lending, the fact remains: multifamily property in San Francisco is cheaper now than it has been in years.

Moreover, the absorption rate—the percentage of listings accepting offers—was 18% in Q2 2023, well below the historical norm. A lower absorption rate signals a market favoring buyers, granting potential purchasers increased negotiating power and opportunities to secure favorable terms.

Attractive Investment Metrics

Key investment metrics suggest now might be a particularly advantageous time to enter the San Francisco property market. The market’s capitalization rate (cap rate) has risen to 5.7 in 2023 (YTD) - a figure not observed since 2010. A higher cap rate generally suggests a higher return on investment, and can be a favorable factor for those looking to invest.

Likewise, the Average Gross Rent Multiplier (GRM), which serves as a barometer for property valuation and investment potential, has dropped to 12.2 times rent—again the lowest since 2010. As noted below, rental and occupancy rates have remained stable relative to historical averages, so this drop in average GRM further demonstrates a dislocation in property values and could signal an opportunity to buy.

Restricted Supply, Recovering Activity

Despite a population decrease between April 2020 and July 2022, occupancy rates across San Francisco have remained stable at 95.3% as of April. This resiliency has been driven in large part by limited housing supply. Financing difficulty and higher development costs, compounded with San Francisco’s geographic constraints, mean that new deliveries for 2023 are projected to be almost 15% below the metro’s 5-year historical average. This lack of supply will continue to support multifamily property values moving forward.

Sales tax revenue also points to key growth areas, with neighborhoods such as the Western Addition and Japantown seeing revenue increases of 41% and 19% over pre-pandemic rates, respectively. These neighborhood’s successes could possibly be attributed to their highly attractive neighborhood features, helping them both sustain their WFH (work-from-home) residential population, as well as bringing in revenue from tourism. As other neighborhoods continue to support commercial recovery and promote new activities designed to bring people back to the city, other neighborhoods may also see an uptick in economic activity.

Steady Rent Rates

While San Francisco rents have seen tumultuous times over the past few years, Q2 2023 brought a much-needed sense of stability. Rental rates for this quarter were roughly the same as in Q2 2022. As we anticipate the city's economic recovery and the return of a portion of the population, the rent stability provides a reliable income stream for prospective property owners.

The Road to Recovery: Key Indicators

A number of factors suggest that San Francisco is steadily recovering from the COVID-19 pandemic's effects, making it an appealing time for property investment:

  • Sales Tax Revenue: Sales tax revenue has also been recovering, up nearly 46% from 2020 and approaching pre-pandemic levels, suggesting a resurgence in economic activity.

  • Unemployment Rates: The unemployment rate in San Francisco has improved significantly from 13.2% in April 2020 to 2.7% in April 2023, indicating a strong job market.

  • Hotel Occupancy: From a low of 19.2% in May 2020, hotel occupancy has risen to 70.0% in May 2023, indicating a resurgence in tourism and business travel.

  • BART and CalTrain Ridership: Although still below pre-pandemic levels, there has been a steady increase in ridership, reflecting a return to regular commuting patterns.


In summary, the third quarter of 2023 may offer a historical window of opportunity to invest in San Francisco multifamily housing. From lower property prices, increased negotiating power, and strengthening demand fundamentals, the San Francisco real estate market is favoring the buyer like never before, and is certainly worth consideration from investors.

357 views0 comments


bottom of page