Spotlight: San Francisco And The Bay Area

The prime residential markets in San Francisco and the Bay Area are experiencing record highs

The story of San Francisco’s real estate markets is the story of global city real estate. The attraction of the urban form has proved irresistible to residents and companies alike, attracting an influx of people that goes beyond urban renaissance. This means the city is once again a powerhouse of industry and commerce in the digital age.

Like so many burgeoning yet land-limited cities, San Francisco’s prime real estate markets are at record highs having not only recovered from the recessionary lows of 2011, but also long since exceeded their former peak.

The fundamental strengths of San Francisco’s markets are assisted by the even faster rise of rents than capital values. There is no investor-induced speculative bubble in San Francisco. At a time when many of the world’s core, prime city markets have seen yield compression due to investor demand, San Francisco’s residential yields have moved out due to rental growth.

This means that the affordability issues plaguing many a world city are writ large in San Francisco’s popular districts. Young people especially risk being priced out of the city. The likely outcome of this pressure is an ‘urban dispersal’: the colonization of new urban areas by creative millennials outside the city limits. Oakland is already benefiting from this.

We also anticipate the urbanization of suburbs and a rise in the popularity of small towns and cities in outlying but accessible districts. Authentic places with heritage and local character have been increasingly popular with ‘priced out’ millennials across the globe. The trend is still urban but the next genesis of real estate in the Bay Area is likely to be increasingly ‘small urban’.

Downtown San Francisco

▲ Downtown San Francisco

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