San Francisco is arguably one of the hottest rental markets in the entire country, and for good reason. With a booming economy, hip neighborhoods, newcomers constantly streaming in, and a vibrant culture, demand couldn’t be higher. There’s a mountain of data that shows San Francisco is one of the country’s leaders when it comes to fetching high rents, and also plenty of evidence that supports continued growth going into the future. If you’re interested in seeking out new investment properties on the rental market, here is your guide to why San Francisco is a solid investment.
Low Vacancy Rates are Fueling Rent Increases
San Francisco currently has the lowest retail vacancy rate in the United States, as well as overall vacancy rates under 3 percent. This fact hasn’t stopped newcomers from flowing into the city to take advantage of everything San Francisco has to offer. It’s not just tech jobs they’re looking for, but for many it’s also being a part of San Francisco’s culture, music, dining and nightlife. This might be why rents have risen 51 percent since 2010, a dramatic increase. While landlords in other parts of the country might be struggling to increase rents, San Francisco is definitely not one of them.
High Median Rent Prices
San Francisco currently has the highest median rent of any city in the entire country. According to research, the median rent for a one-bedroom is currently over $3,100 while a two-bedroom is fetching $4,000. In fact, year after year, San Francisco rents seem to break new records.
One would think that this is a sign the rental market should be cooling down. However, there are plenty of reasons why San Francisco can expect growth going into the future. For one, geography is favorable to rental investors. San Francisco is resting on a peninsula, which means there is limited space to dump new units. There are also strong zoning laws that require buildings to stay small, which has kept homes and apartments in many neighborhoods under three-stories. All of this means there likely won’t be many high-rise buildings hitting the market, which would theoretically lead to a reduction in demand and a fall in rental prices.
An Economy Set to Grow Even Further
It is well known that San Francisco is undergoing a sort of economic renaissance right now. Companies like Google, AirBnB, Facebook, Pinterest, Dropbox, and countless of other startups are all based in San Francisco or nearby. Not only is the tech sector strong, but so are other sectors such as hospitality and the arts due to the wealth influx to the city.
There is no sign that San Francisco is slowing down either, with tech giants, scrappy startups and plenty of creative people moving to the city to gain a foothold. In fact, companies like Salesforce are hiring thousands of workers to fill their skyscraper in the hot South of the Market area. Other hot neighborhoods include Bernal Heights, which was voted as the hottest neighborhood in America in 2014 and Pacific Heights, which even has a lower vacancy rate than San Francisco’s average, coming in at 1.6 percent.
Ultimately, there’s no doubt that San Francisco has been a great investment, but it’s also clear that San Francisco is likely set for further growth. This is due to the unique environment surrounding San Francisco’s booming economy, low vacancy rates, lack of housing development and strong demand. If you weren’t interested in rental properties in San Francisco, then you might just be now.
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