San Francisco Mid-Year 5+ Unit Market Report

San Francisco Rents Are at Record Highs, Inventory Is at an All-Time Low—and It Is a Good Time to Be a Seller

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In more than 20 years of selling San Francisco apartment buildings, I have never seen a rental market quite like this one.

Rents have increased dramatically, reaching record highs in many neighborhoods. At the same time, very few 5+ unit apartment buildings are available for sale. This combination of exceptional rental demand and historically low inventory has created a compelling window for owners considering selling.

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Record Rents—But Not for Every Building

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Several factors have pushed San Francisco rents to new highs: limited housing construction, renewed employment growth, the expansion of artificial intelligence and technology companies, fewer available rental units and the high cost of purchasing a home. However, rent control has prevented the income of many long-held apartment buildings from keeping pace with the broader rental market. A vacant unit may lease at a record rent, while a neighboring unit occupied by a long-term tenant may generate substantially less.

This has created an unusually wide gap between in-place income and potential market income. Buildings with vacancies, recent tenant turnover or rents closer to current market levels are particularly valuable today.

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Investors Are Using Less Leverage

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Higher interest rates have changed how investors purchase apartment buildings. Many buyers active in the 5+ unit market are using low leverage, while some are purchasing entirely with cash. They are taking a long-term view of San Francisco and focusing on strong locations, quality buildings and future income growth. These buyers are not waiting for interest rates to fall. They are looking for opportunities to acquire well-located San Francisco real estate at pricing that remains considerably below the previous market peak.

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Values Have Reset—and Buyers See Opportunity

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The average capitalization rate for San Francisco 5+ unit sales is approximately 5.9% year to date, compared with roughly 3.8% at the market’s low point in 2015.

The gross rent multiplier has fallen from a peak of 17.8 in 2016 to approximately 11.7 in 2026. Average pricing has recovered to approximately $432 per square foot, up from approximately $402 per square foot in 2024, but still well below the 2018 peak of $562 per square foot.

For buyers, this creates an opportunity to purchase buildings at a lower basis while benefiting from an exceptionally strong rental market.

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Low Inventory Gives Sellers an Advantage

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Sales volume remains low because many longtime owners have chosen not to bring their properties to market. As a result, qualified buyers have very few buildings from which to choose. Low inventory does not mean low demand. There is substantial capital looking for San Francisco apartment buildings, but investors are selective. Properly priced properties with strong locations, good unit mixes, vacancies or meaningful rental upside can stand out and attract competitive interest. This is especially important because every apartment building is different. Neighborhood, unit mix, condition, tenant profile, existing income and future upside all affect value. In a low-inventory market, the right positioning can create urgency among buyers who may have been waiting months for a suitable opportunity.

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It Is a Good Time to Be a Seller

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The market is giving owners something we have not seen in several years: record rental demand, improving investor confidence and very little competing inventory. That does not mean every building should be sold today, or that pricing no longer matters. Buyers remain disciplined, and buildings must be valued based on their existing income as well as their long-term potential. But for owners already considering a sale, this may be an excellent time to move forward. A well-positioned property can benefit from the scarcity of available buildings and reach buyers who are actively looking to place capital in San Francisco.

If you own a San Francisco apartment building and would like to understand its current value, I would be happy to prepare a confidential valuation and discuss the best strategy for bringing it to market.

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