San Francisco Apartment Supply Catching up to Demand, If only Temporarily
San Francisco Chronicle business reporter, Kathleen Pender, pens a follow-up to an April piece about the increasing number of high-density residential projects being built in the Bay Area, particularly San Francisco, following the trend seen in other areas with expensive rental markets like Manhattan and Seattle, with one notable exception: it's temporary.
More signs that the Bay Area’s overheated rental market is cooling off: At [the National Association of Real Estate Investment Trust Investor Forum in New York City on June 7], two executives of major apartment owners said that increased supply is causing them to lose pricing power, although they think it will be temporary.
[Chief operating officer David Santee of Equity Residential] attributed the Bay Area slowdown to new supply in the “urban core” and South Bay. On the same panel, the firm’s chief executive David Neithercut said he is still seeing strength in New York and San Francisco, “just not as much as we had expected.” He said the “headwinds” his firm is facing in San Francisco are temporary.
What renters may receive before new construction drops next year
Some property managers of new, high-end apartment buildings "are offering free rent for a month or more, six months of free parking, free electricity for a year or up to $1,500 in gift cards," writes Pender in a follow-up piece published in The Chronicle on Sunday. "Some are waiving application fees and cutting security deposits to $1,000 or less on units that rent for $3,000 a month and up."
Incentives amount to a 8.3 percent decrease in rent, but it makes more sense from a marketing perspective, as well as a future rent increase perspective, to offer gift cards or other perks rather than cutting the rent.
Can you afford to move to San Francisco? Two perspectives on median rents.
Axiometrics, a research and consulting firm, does adjust for rental incentives. It said that the average rent in San Francisco was $3,252 in May, up 2.3 percent from the previous year. Rents grew 9.2 percent the previous year.
Abodo.com said that rents in San Francisco, not adjusted for incentives, fell to an average of $3,929 a month in June, down 7 percent from last month.
Comparing San Francisco rental market to other cities in U.S.
Perks may not be available next year due to the end of the Bay Area's apartment boom. See Chronicle chart showing the "number of apartment units expected to open this year and next, compared with the previous two years" in San Francisco, Oakland, and San Jose metro areas.