Despite broader economic uncertainties and a cautious investment climate, San Francisco’s multifamily real estate market showed notable resilience in the first quarter of 2025. Here's a breakdown of the key trends and insights shaping the landscape:

1. Market Fundamentals Hold Steady
While commercial real estate transaction velocity slowed due to investor caution—largely influenced by global tariff uncertainties—San Francisco’s multifamily sector remained stable. Rents and capitalization rates (cap rates) held firm, signaling continued investor confidence1.

2. Demand Driven by Population Growth and Tech Expansion
The city experienced a surge in rental demand, fueled by an influx of new residents attracted by expanding tech and AI job opportunities. This led to the absorption of over 1,000 units in Q1 alone, with the southern submarkets—including Mission Bay, San Mateo, and Redwood City—leading the charge 2.

3. Rent Growth and Vacancy Trends
Average rent growth reached 2.8%, the highest since mid-2022.
Vacancy rates dropped to 5.3%, with Class B and C properties seeing even lower rates at 4.7% and 4.5%, respectively.
Mission Bay led in rent increases, averaging 6.4%, followed by South of Market at 4.5% 2.

4. Construction and Development Activity
Construction activity ramped up, particularly in the southern metro areas. Notable developments include:
The Quincy, a 501-unit Class A project in Mission Bay, set for completion in September.
Over 25 proposed projects in South of Market, potentially adding 5,000+ units 2.

5. Investment and Sales
Q1 2025 recorded $734 million in multifamily sales volume.
The largest transaction was The Plaza in the Pilgrim-Triton submarket, sold for $161.4 million.
Average sale price per unit exceeded $400,000, though slightly down from Q4 2024.
Cap rates saw a modest uptick, reflecting cautious optimism among investors 2.

Looking Ahead
With declining interest rates and a potential shift of capital toward real assets, the multifamily sector in San Francisco is poised for continued momentum. As long as employment growth and housing demand persist, especially in tech-driven submarkets, the city’s multifamily market is expected to remain a stronghold for investors.