San Francisco finally experienced a post-pandemic October where residential real estate sales began to come alive. According to a recent report published by the San Francisco Business Times, monthly sales volume was up 19% year-over-year, year-to-date sales were up 11%, days-on-market declined, and overbidding increased.
Interest rates continued to rise in October and early November, but after the election, the Federal Reserve announced its second interest rate cut of the year, trimming its benchmark rate by 0.25 percentage points amid cooling inflation. Meanwhile, all three major stock market indices rose to record highs in November.
San Francisco’s three-month-rolling median single family home sales price in October was $1.63 million, up about 2% year-over-year, though still far below the 2022 peak. For condos, that sales price in October was $1.14 million, up about 5.5% year-over-year, but also below its 2022 peak.
Perhaps due to soaring stock values, increases in luxury home sales have far outperformed the overall market this year. Year-to-date sales of luxury houses over $5 million were up 40%, while luxury condo and co-op sales of $2.5 million and over were up 48%.
Overall, in October, 53% of San Francisco sales were single family homes, and 47% were condos, co-ops, TICs and townhouses. Overbidding occurred in 77% of house sales, and in 44% of condo sales.
Because of seasonal fluctuations, sales will likely cool now as the holidays approach. They aren’t likely to pick up again until after February. But it’s nice to see the residential real estate market close out the year on a happy note for a change.
What’s more, there’s even good news in San Francisco’s commercial real estate sector, according to two other reports in the Business Times.
In fact, San Francisco’s long-suffering commercial real estate market is expected to reach a key milestone this year for the first time since the pandemic hit in March 2020.
“2024 will be the highest year of leasing by tech companies since 2019,” Colin Yasukochi, head of CBRE Group’s Tech Insights Center, told the Business Times in a discussion about tech companies’ leasing activity in the Bay Area.
The burgeoning AI sector is a key factor in the Bay Area’s strong showing.
San Francisco and Silicon Valley were the most active markets nationally for AI leasing by volume in the third quarter, CBRE said. AI companies leased 3.9 million square feet in San Francisco and they leased 2.6 million square feet in Silicon Valley over the past five years, according to CBRE data.
The Bay Area’s longstanding reputation as the nation’s biggest magnet for venture capital often lifts the region’s commercial real estate sector, since one of the first moves by companies getting venture funding is to lease office space. The Bay Area captured 76% of all AI VC funding in the first half of 2024, CBRE said.
The surge in tech leasing isn’t going unnoticed among institutional investors who are said to be doing their homework on investing in San Francisco office towers in the next six to twelve months, according to real estate software company VTS.
“It’s pretty clear that the worst is behind us in terms of demand fundamentals in the San Francisco office market,” Max Saia, vice president of investor research at VTS, told the Business Times. “I think people are looking at San Francisco and saying, ‘Hey, that looks like it’s getting meaningfully better.’”
San Francisco commercial real estate purchases in recent years have been dominated by smaller investors willing to take on the risk of a difficult market in return for an astonishing discount. Now some see more traditional institutional investors preparing to jump into the market.
This prediction comes from VTS, based on its quarterly VTS Office Demand Index, which tracks new tenants touring office space in San Francisco and other key markets. The “active demand” of tenants touring space can signal where the market is headed long before leases are signed.
VTS said tech-heavy markets have gained “significant momentum in office demand after years on the sidelines.”
Over the past 12 months, demand for office space has surged in San Francisco. And that’s good news for commercial real estate, and for the city and its residents. A busy, thriving downtown is always a welcome sight.
Comments: [email protected]
