Local multifamily market outlook | JPMorgan Chase – JP Morgan

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While San Francisco’s overall vacancy rate remains above its long-term average and rents haven’t quite bounced back to pre-pandemic levels, the multifamily market’s recent performance is heading in the right direction, Chen said.

“The lasting appeal of coastal and urban life remains,” she said.

Pockets of the city core are still seeing somewhat elevated vacancies and lower rents, said David Diggs, Managing Director and Senior Regional Sales Manager for Commercial Term Lending at JPMorgan Chase.

“But for the broader city and broader peninsula, things look solid and stable,” he said.

A spike in new construction, notably in the South of Market area, is contributing to San Francisco’s above-average vacancy rate, which is projected to rise from 4.2% in 2023 to 4.5% by the end of this year.

That could constrain asking rents, which are expected to rise 1.5% in 2024 after falling 2.2% last year, according to Moody’s. Rents at comparatively affordable units might be more affected than luxury apartments, which benefited from steady income growth in higher-earning households and demand from would-be homebuyers facing a challenging housing market, Chen said.

“Affordability is taking a bigger toll on the moderate- to low-income household,” she said.

Slower-than-usual rent growth could be a challenge for property owners also contending with inflation and higher costs, Diggs said. The Bay Area’s overall job market, however, has still shown growth despite some layoffs at technology companies during 2023. 

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