San Francisco’s current rental market has hit boom times, according to Paragon Real Estate rental agent Laura Gray. Gray, who delivered an update on the city’s current conditions today at Paragon’s monthly sales meeting, handles unfurnished rentals exclusively within the San Francisco market. Her inventory of homes for rent includes houses, condos, apartment buildings and TICs.
“It’s been an exciting, epic year for the rental market in San Francisco,” Gray said. “Rents have gone up anywhere from 15 to 25 percent across the city and in some neighborhoods it even exceeds that.”
Gray cited SOMA/South Beach and Pacific Heights as particularly strong markets. Examples of increases in rents included a one-bedroom she recently rented in Pacific Heights for $3400, which last year might have only commanded $2800. A two-bedroom that recently rented for $5400 might have only achieved $4700 a year ago, she said. Gray also cited $3250 for a one-bedroom in a newer building at Van Ness Avenue and Eddy Street, $2500 for a 400-square foot studio at Hayes and Page streets, and $5000 for a two-bedroom, tri-level loft in SOMA.
Demand for studios and one-bedrooms is particularly strong.
“The entry-level segment is on fire,” Gray said. “Tenants for the smaller homes have their claws out – I’ll see fifty people lined up at the front door ten minutes early for my open houses when I show a one-bedroom or studio.”
She attributes the increase in younger single tenants to the the aggressive hiring of tech firms such as Google, Apple and Twitter.
With demand for smaller rentals so high, many younger tenants are choosing to double or triple up in a larger three-bedroom flat. With singles prepared to pay anywhere from $1500 to 1800 per month for a shared rental, larger flats in San Francisco are easily renting out for $5000 to 6000 per month.
Gray also reported having an easier time renting out larger luxury homes. “Between 2009 and 2011 there was no demand for big fancy homes in the $7000 to $9000 (monthly) range,” said Gray. This year I’ve rented (many more) of them” Surprisingly, demand for these kinds of residences comes from tenants hailing from places like Germany, France and Switzerland.
With the rental market so strong, even homes with parking are able to command high rents, although the differential for parking runs about $250/month. Gray also pointed out that homes with parking rent out more quickly, thus generating a stronger, more consistent cash flow for the owner.
While the market ran hot and heavy earlier in the year, Gray said things abruptly slowed down after Labor Day. “The market has cooled in the last few weeks,” she said. “I’ve dropped the rents on a few of my listings, but the demand still isn’t there.” She is uncertain as to why the market slowed. A slowdown in hiring for the last quarter of the year could be a factor, she noted, along with people not wanting to move during the holiday season.