San Francisco apartment rent prices are dropping fast as tech companies embrace remote work and unemployment rises
- The average rent for a one-bedroom apartment in San Francisco fell 11.8% year over year in June, following a 9% year-over-year drop in May.
- Tech companies like Twitter and Facebook are embracing remote work on a long-term basis, leading some tech workers to leave the city as they will no longer need to commute to an office.
- Rising unemployment thanks to the coronavirus pandemic and lockdown may also be a factor.
New monthly data from apartment rental platform Zumper shows San Francisco rents were down nearly 12% year over year in June, making the city's decline the largest in the nation, and a record slide for San Francisco. It's also the second consecutive month San Francisco rental prices have dropped, says the company, which based these statistics on 9,000 listings in San Francisco.
According to Zumper, the median rental price for a one-bedroom apartment in San Francisco fell 11.8% year over year, from $3,720 to $3,280, beating May's 9% drop. The survey also reports a 1% uptick in national rents, with the average median apartment in the U.S. renting for $1,229 in June.
"Zumper has been tracking rent prices across the country for over five years but we have never seen the market fluctuate quite like this," says Zumper co-founder and CEO Anthemos Georgiades. "For example, rent prices in San Francisco have historically only gone up and typically only incrementally, yet now we are seeing double-digit percent rent reductions. This is unprecedented for this generation of renters."
The new numbers reflect prices in June, just weeks after Twitter and Facebook announced many employees currently working from home during the coronavirus pandemic could continue to do so permanently. As many tech workers in San Francisco mull their newfound geographic freedom, Georgiades says, the city's real estate market is rapidly changing.
Georgiades says the dramatic dip is due in part to "the very real move of many mainly technology employers to a future of remote work, meaning millions of employees now looking outside of dense metropolitan areas for their next home now that their commute time is no longer a factor."
He also attributes the shifts in the U.S. rental market to "pandemic pricing," adding "unprecedented number of Americans are unemployed and landlords are having to adjust to this in their rent renewals or vacancy price asks."
The decline in rents could also have an impact on would-be homebuyers in San Francisco, according to Schery Bokhari, an economist at Redfin.
"If rents continue to decline in the city, we could also see some landlords opting to sell and would-be buyers deciding to continue renting," says Bokhari, who also notes that the inventory of homes for sale in San Francisco is up 18% year over year.
"The jump in inventory in San Francisco may indicate less desire for homes in the expensive urban center as buyers envision a permanent shift towards remote work and seek out larger homes and affordability further from the city," says Bokhari.
Zumper also notes that rental prices in markets just outside major metropolitan areas are up. Some examples include Providence, Rhode Island, and Sacramento, California, where prices are up about 5%.
In yet another sign that tech workers are fleeing the city, the San Francisco Apartment Association, which conducted a survey of nearly 300 landlords who own more than 10,000 apartments (or about 6% of the city's total rental units), reports nearly 7.5% of respondents decided not to renew their leases over the last three months. While the SFAA doesn't have figures from last year, officials with the organization say the increase is "shockingly high."
"Anecdotally we had been hearing from members that lots of their renters were turning in their keys and leaving," says Charley Goss, the association's policy director. "Some residents are leaving the city altogether, but some are deciding to leave behind their roommate situations or are seeking more space."