San Francisco has attracted commercial real estate investors and tenants nationwide as a vibrant, high-demand market to seek out opportunities. A buzzing tech and finance hub, San Francisco represents a land of potential for those seeking to trade in one of the highest-value markets in the US.
Crexi equips these commercial real estate players with the data, tools, and broker connections they need to discover and transact commercial real estate in San Francisco. Brokers use Crexi’s robust listing and marketing suite to represent San Francisco properties to a national audience and capture the highest return on investment for their clients.
With over $5 trillion represented and $440 billion in facilitated transactions since its launch nationwide, Crexi proudly serves San Francisco and the larger Bay Area economy as the nation’s fastest-growing online commercial real estate platform.
The State of San Francisco Commercial Real Estate
San Francisco is a beautiful and vibrant city on the United States’s west coast, famous for its iconic Golden Gate Bridge, cable cars, steep rolling hills, and historical landmarks. It is also a major global financial center and home to many established tech companies, making it an ideal location for those looking to launch or expand their business.
The city boasts diverse neighborhoods with distinct cultural identities, offering something for everyone. The long-established Chinatown district is a bustling hub of activity; North Beach provides stunning views of the bay and Alcatraz Island; Nob Hill is one of the most desirable residential areas; while Mission District boasts edgy street art galleries, trendy restaurants, and eclectic stores.
With its strategic location and tech-savvy workforce, the region’s commercial real estate market is highly competitive and presents ample investment opportunities for small businesses and larger corporations. For those looking to relocate or invest in commercial real estate, San Francisco has something for everyone.
San Francisco Regional Breakdown
Although the population has been shrinking over the past few years, San Francisco may be coming back. Over the past 12 months, the city has witnessed the 2nd-largest worker population gain in the US, with nearly two people coming to the Bay Area for every one that leaves:
- Over 815,000 reside in the City of San Francisco, and more than 4.6 million in the San Francisco-Oakland-Berkeley metro area.
- The population of the metropolitan area increased by 0.3% from 2022.
- The most populous cities in the Bay Area are San Francisco, Oakland, Fremont, and Santa Rosa.
- The median age in San Francisco is 40, a little higher than the figure in California.
- About 42% of the residents are between 20 and 49.
- San Francisco receives an A+ grade from Niche.com and is rated as the 2nd best city for young professionals in America.
The San Francisco Job Market
Despite recent tech layoffs, the economy remains resilient, according to the San Francisco Chronicle. Job sectors showing the most robust growth include professional and business services, trade and transportation, financial services, and educational and health services:
- The unemployment rate in the San Francisco metro area is 2.4% (BLS December 2022), about the same rate as before the pandemic.
- San Francisco is ranked as the best city to find a job by WalletHub, using key criteria such as opportunities, employment growth, average starting salary, and employment outlook.
- The most recent information from Data USA shows that employment growth year over year is 0.25%.
- GDP for the San Francisco-Oakland-Hayward MSA is nearly $669 billion, soaring by more than 100% over the last ten years.
- Key industry sectors in the Bay Area include IT & software, social & digital media, life sciences, biotech, environmental & cleantech, and international business.
- The largest private employers in San Francisco are Salesforce, Wells Fargo, Sutter Health, Uber Technologies, and Kaiser Permanente, according to the Business Times.
- Nearly 52% of the residents hold a bachelor’s degree or higher, about 1.4 times the rate in California and 1.5 times the rate in the US.
- US News ranks the University of California Berkeley, University of San Francisco, San Francisco State University, and Saint Mary’s College of California as the top 4 universities in San Francisco.
- Transportation infrastructure in the Bay Area includes three international airports, extensive public transit, two ferry systems, commuter and long-distance rail, numerous Interstate and State highways, and the Port of San Francisco.
San Francisco Industrial Market
The industrial market in San Francisco’s Peninsula stayed active through 2022, ending the year with 373,022 SF of net absorption and a vacancy rate of 2.0%. Limited availability of space has provided the region with an advantage in terms of leasing activity despite economic uncertainties and the risk of recession in 2023, according to CBRE:
- Total industrial inventory: 35,313,000 SF
- Average asking rent: $2/SF manufacturing and $1.57/SF warehouse
- Vacancy rate: 2.0%
- Absorption: 373,022 SF (2022)
- Key leases by tenant: DHL Global Forwarding 76,375 SF, Pacific Gourmet 70,335 SF, Pacific Produce 51,980 SF
- Key sales by property: 513 Eccles Ave $80 million, 860 San Mateo Ave $2.1 million
- Investment sales trends (NAR Commercial): $575 million transaction volume in Q3 2022, 4.6% market cap rate
- Largest industrial submarkets: South San Francisco, Brisbane, Burlingame
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San Francisco Office Market
Although office leasing volume continues to decrease, tenant activity is increasing, indicating users’ desire to return to the office but in smaller spaces. The technology sector is forecasted by Cushman & Wakefield to reduce its office footprint, providing more bargaining power for tenants in the FIRE, professional services, and legal industries. Landlords may need to offer concessions on older buildings or shell space to attract tenants and sign new leases. Here are the trends in the San Francisco office market from Newmark:
- Total office inventory: 88,449,298 SF
- Average asking rents: $74.15/SF per year, full-service gross
- Vacancy rate: 32.1%
- Absorption: -4,574,754 SF in 2022
- Key leases by tenant: First Republic Bank 150,000 SF, Sigma Computing 82,597 SF, Databricks 57,625 SF, Bank of the West 49,399 SF
- New construction: 710,000 SF
- Key sales by property: 1155 Mission St. $9.5 million ($605/SF), 701 Sutter St. $8.35 million ($433/SF), 431 Jessie St. $4.37 million ($728/SF)
- Investment sales trends (NAR Commercial Q3 2022): Sales volume $721 million, market cap rate 4.7%
- Largest office submarkets: North Financial District, South Financial District, SOMA
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San Francisco Retail Market
The San Francisco Bay Area retail market is facing challenging times, with rising vacancy rates and an uncertain future. As the retail economy continues to falter, rents may soften while landlords offer more favorable terms to lure in tenants. Retail property buyers in San Francisco may benefit from more competitive prices and a broader selection of available properties for sale. These are the most recent retail stats from Cushman & Wakefield and Kidder Mathews:
- Total retail inventory: 5,100,000 SF
- Average asking rent: $38.20/SF per year, NNN
- Vacancy rate: 5.9%
- Absorption: -78,179 SF in Q4 2022
- Key leases by tenant: Convene 65,400 SF, Kern’s Jeweler 6,800 SF, City Smokehouse 2,400 SF
- New construction: 242,721 delivered in Q4 with no retail under construction
- Key sales by property: 1550 Steiner St. $3.8 million ($513/SF), 1532-1542 20th St. $3.2 million ($697/SF), 823 Divisadero St. $2.5 million ($486/SF)
- Investment sales trends (NAR Commercial): Avg transaction sale price $466/SF, market cap rate 4.5%
- Median household income: $110,837, up 4.5% year over year (Data USA)
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San Francisco Multifamily Market
The Bay Area multifamily market saw a loss in occupancy during the fourth quarter of 2022, breaking an eight-quarter streak of net gains. While 2,887 units were delivered in Q4 2022, it was below the 3-year quarterly average, and the vacancy rate rose 40 basis points from 5.5% to 5.9%. According to the Q4 2022 San Francisco Multifamily Report from Cushman & Wakefield, development activity remains strong, with over 32,600 units under construction, up 41.9% year over year:
- Multifamily inventory: 812,996 units
- Average effective rent: $2,458/unit
- Rent growth: 0.1% year over year
- Vacancy rate: 5.9%
- Net absorption: 7,421 units YTD with 32,634 units under construction
- Key sales by property: Centerra (San Jose submarket $185 million, $536,232/unit), Nova at Green Valley (Fairfield submarket $146.5 million, $521,374/unit), Bay Vista at Meadow Park (Novato submarket $97 million, $440,909/unit)
- Market cap rate: 3.5% (NAR Commercial)
- Largest submarkets: Santa Clara, Alameda, San Francisco, San Mateo
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