Evaluating the San Francisco apartment market

Paragon has just come out with its 2015 mid-year report on the San Francisco apartment-building market, a survey of factors including appreciation rates, recent sales, rental rates and the new construction pipeline. It’s important to keep in mind that, since things such as tenant profile rent control and quality of construction vary enormously, median prices may be seen as very good general indicators in the city.

We’re finding that the Pacific Heights-Marina district almost always comes out on top. Typically we also see the Noe-Eureka Valleys district and the Russian and Nob Hills district top the Hayes Valley-NoPa area in terms of values and sales, but due to the mix of buildings sold in the past year, that wasn’t the case. We’re also seeing some districts that have been experiencing gentrification and rapid appreciation (SoMa and the Mission, anyone?) be affected by a plethora of older buildings and very long-term tenants under rent control. This can be shown in terms of income and sales prices.

Ninety-five percent of the city’s residential multi-unit property sales are of buildings of 15 units or less, with 80 percent in buildings of four or fewer units. Typically, sales of two-to-four unit buildings range from $1 million to $3 million in the city, while most sales of larger apartment buildings are seen in the $2 million to $5 million range – but there are deals that outstrip these prices by major margins.

That said, smaller buildings typically sell at higher dollar-per-square-foot values, if lower median sales prices, than larger buildings. Here again we see the highest values in the Pacific Heights-Marina district, with the Russian-Nob Hills district and the Noe-Eureka Valleys district coming in second and third respectively.

Tomorrow we’ll continue our look at this report.