With a remarkably buoyant economy, San Francisco once again stands at the center of the world stage, propelled by extraordinary gains from the AI economy, steady political leadership, and the city's timeless charm. Familiar headlines have returned as well, reporting sharp increases in local home prices and rents. Regional employment continues to climb, and despite elevated interest rates, investor appetite for multifamily assets remains robust, particularly for small and mid-size buildings, as capital flows into this reliable market. As the third quarter comes to a close, here is a look at the key metrics and trends from the second quarter.

5-9 Unit Buildings

Smaller buildings delivered the strongest year-over-year gains in San Francisco's multifamily market in the second quarter. Compared with Q2 2025, price per square foot in the 5–9 unit sector jumped 30% to $494, while price per unit climbed to $405,141, up from $330,532 a year earlier. As values rose, cap rates compressed to 5.52% from 5.87%, the lowest level since the fourth quarter of 2022, and gross rent multipliers (GRMs) rose to 12.88 from 11.09. Transaction activity kept pace with pricing. 30 sales closed during the quarter, totaling $76,038,500 in volume, up 40% from the same period last year. Over the past four quarters, 132 buildings changed hands for $333,765,125, a 58% increase in dollar volume over the prior twelve months.

Cap Rate

10-Plus Unit Buildings

The larger apartment building sector posted a more measured recovery in the second quarter. Average price per square foot edged up to $414 from $404 a year ago, while price per unit fell to $322,383. Cap rates tightened to 5.62% from 5.77%, the lowest since the second quarter of 2023, and GRMs rose to 11.42 from 10.98. The sector recorded 22 sales, compared with 27 in Q2 2025, for a total dollar volume of $179,593,090, down 4.7% year over year. The bigger picture is more encouraging. Over the past four quarters, 91 larger buildings sold for a combined $776,602,105, up 73% from the prior twelve months.

Charts in this report reflect four-quarter moving averages.

Price / Sq Ft

Rents Continue Unprecedented Rise

San Francisco's rental market remains on fire. According to Apartment List, which tracks the median rent on new leases, the typical San Francisco unit leased for $3,878 in September, an eye-popping 25.7% jump from a year ago. One-bedrooms went for $3,915 and two-bedrooms for $4,610, so newcomers are paying a steep price to get in the door. For comparison, the U.S. Census put the median rent across the city at just $2,476 in 2024, a reminder that tenants already in their units are paying far less than market rates.

Units Built

SF's Vacancy Tax Tossed by State Appellate Court

San Francisco property owners won a major victory this month when the California Court of Appeal struck down Proposition M, the city’s Empty Homes Tax. Approved by voters in 2022, the measure would have charged owners of buildings with three or more units $2,500 to $5,000 per vacant unit, with the tax increasing to $20,000 per unit by the third year. The court ruled that the tax conflicts with the state’s Ellis Act, which gives property owners the right not only to withdraw from the rental business but also to remain out of it. The court held that San Francisco cannot impose a “prohibitive price” on the exercise of that right.

The challenge was brought jointly by the San Francisco Apartment Association, the Small Property Owners of San Francisco Institute, and the San Francisco Association of Realtors. For buyers and sellers, the ruling eliminates a potentially significant financial penalty and gives property owners greater flexibility to hold units vacant while transitioning between tenants, completing renovations, or preparing a property for sale.

Mayor Lurie Declares Rent Emergency 

With a surging rental market and a purported uptick in evictions, San Francisco's Mayor Daniel Lurie recently responded by declaring a "rent emergency" and proposing new costs and restrictions for the owners who provide much of the city's rental housing. Under the proposed nonpayment rule, landlords couldn't evict a tenant until the tenant owed at least a full month of fair market rent, which is $2,977 for a one-bedroom. The banked-increase cap would limit banked rent increases (potentially retroactive) and capital-improvement pass-throughs to 10% a year, which could disadvantage owners who held rents down in earlier years. Ellis Act relocation payments would also rise 25%, or roughly $3,000 more per person. Of course, the deeper issue is supply. San Francisco has completed just 489 new housing units this year. Property owners are already responding. The San Francisco Apartment Association has formally objected, arguing that state law preempts the nonpayment ordinance and that the city should wait while the California Supreme Court considers a nearly identical Los Angeles law.

Employment Ticks up Year-over-Year

Employment in the San Francisco Metro Division, which includes the counties of San Francisco and San Mateo, dipped in August, shedding 2,100 jobs from the previous month, according to the state's Employment Development Department. Professional and business services led the monthly decline with a net loss of 2,800 jobs, while government and leisure and hospitality posted gains. Year over year, payrolls grew by 12,100 jobs, or 1.1%, as gains in leisure and hospitality, education and health services, and government offset losses in financial activities, information, and professional and business services. The unemployment rate rose to 4.1% from a revised 3.9% in July, but it remains below the 4.4% recorded a year ago and well under the statewide rate of 5.4%.

Employment [Monthly]

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2nd Quarter Sales [5-9 Units]

Price / Sq Ft [4 Units]

2nd Quarter Sales [10-Plus Units]

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© Copyright 2023, Maven. The information provided in this newsletter is not intended to constitute legal, tax or accounting advice; the content is for general information purposes only. Maven is a commercial real estate firm based in San Francisco that brings buildings to life. We make a difference in our communities applying our vision, values and connections to populate the landscape on behalf of our clients. We implement innovative marketing strategies that are often unexpected, yet effective.