San Francisco's Real Estate Market is Changing FAST in 2025

San Francisco's on the brink of a major comeback. There's no question that the city was among the hardest hit by the pandemic and one of the slowest metropolitan areas in the country to recover in the pandemic aftermath. We had a crashing commercial real estate market, people fleeing the city because of the ability to work remotely, upticks in crime and homelessness, a decrease in tourism, and retail stores leaving their long-term flagship posts in the city. But there are signs that those trends are finally reversing course, and we're gonna have a sea change in the real estate landscape in San Francisco in 2025 and beyond. This is Austin Klar, your lawyer turned real estate agent in San Francisco, in Marin County. I moved to the Bay Area over a decade ago to work as a lawyer at one of the biggest law firms in the world. Now I help people relocate to the Bay Area from all over the country. And in this video, I'm going to break down all the major changes we're seeing in San Francisco that are having the biggest impact in San Francisco's real estate market. Let's dive right into it. And the first major change is that the commercial real estate market in San Francisco, in particular the office market, is on the brink of a correction. We all know that the San Francisco office market got absolutely hammered during the pandemic with the tech hub of San Francisco, and other industries as well—law firms, consulting firms, financial firms—all largely adopting remote work and a heavy string of tech layoffs. According to a report by CBRE for Q3 of 2024, the office vacancy rate reached its all-time high at 36.9%. But there are some signs in the data suggesting that the office market is about to reverse course. The office vacancy rate increased by 0.3% in Q2 of 2024 and 0.1% in Q3 of 2024, which was the smallest vacancy increase since 2019. So the trend shows that the vacancy rate is stabilizing, and experts believe that it's going to turn positive, meaning positive absorption, more people leasing than leaving, by early next year. And this makes sense, as a lot of companies in the city are changing their remote work practices to adopting hybrid or full-time in-office environments. Salesforce, which is San Francisco's largest private employer, has adopted a policy where people have to be in office depending on their status of employment or what type of employment they're in. For 3 to 5 days a week. Other companies, Apple, Google, Meta, major companies, tech and non-tech, law firms, consulting firms, all adopting hybrid work policies. That's the supply side of the equation. It's showing stabilization and likely a decrease in supply heading into the new year. On the demand side of the equation, we've seen the most leasing activity year to date since 2019. And there are areas in the city like Mission Bay and China Basin that have actually had positive net absorption, meaning more leasing has happened than vacating has happened. This is thanks in part to some mega leases signed by AI companies like OpenAI, which has close to 1 million square feet of office space with a heavy concentration in the Mission Bay area. You also have other leases by Anthropic in the SoMa area. You have Scale AI, and there are a ton of other companies that are committing to San Francisco as well, like Strava and Notion. And personally, I'm working with several clients relocating from all over the country who are coming to SF or coming back to SF because of return-to-office policies. We'll see if these trends continue, but based on what we're seeing now and what we've seen over the past 6 months, experts expect vacancy rates to actually drop and absorption rates to rise heading into the new year. And it's not just office. The retail market is improving as well. A recent report from Avisen Young shows both employment and job postings for retail is up in Q3 of 2024. We're also seeing employment in the accommodation space and the food space up as well over that same time period. By the way, if you wanna stay up to date on the San Francisco or Marin County markets, current events, new developments, lifestyle, definitely subscribe to my channel because I make videos about that stuff every single week. And if you or someone you know is thinking about relocating and have questions about the market, definitely reach out to me. I've helped people relocate to SF and Marin from all over the country, and I'd be happy to be a resource. I'll drop my contact information in the description below. Reach out anytime. Now back to the changes we're seeing citywide that are impacting the real estate market here. And the next one is a pretty big one. It's a downward trend in crime and homelessness. If you have a pulse and spend any time on social media or reading the news, you have seen headlines and videos all about the state of crime and homelessness in San Francisco. Anyone who lives here or spends any meaningful time here knows that those issues are heavily concentrated in just a few subdistricts of the 80 different subdistricts in the city. Now, those problems are very real, especially in those areas, and there's a lot that needs to be done to address those issues. And hopefully the new Lori administration implements a lot of policies that makes more headway on those things. But those issues that you see, you know, blown up in the headlines are not emblematic representative of broader San Francisco. Generally speaking, efforts that the city has implemented over the past year plus have had a positive effect on crime and homelessness. According to the San Francisco Police Department's crime dashboard, crime is down across every single category reported year over year. And according to a September 2024 report, after a recent Supreme Court case affirming the city's ability to enforce anti-camping laws, we've seen a decrease in the number of unsheltered people living in streets, tents, and vehicles. More work is obviously needed to improve services that are made available to unhoused people, especially ones who are in shelters looking for permanent housing. But the work that has been done is clearing up the streets, which is really important. And like I said, there's a lot of hope and optimism that the new administration, the Lorie administration, taking over from London Breed next year is going to bring a lot more improvement. Another major factor is a huge resurgence in downtown San Francisco. Downtown San Francisco. It is undergoing a ton of change. You've got developers completely rethinking what it means to be in the office. Michael Schvo with his nearly $500 million renovation of the iconic Transamerica Pyramid that opened in September, and it's bringing several new restaurants, luxury amenity spaces to downtown, and it's yielding rents over 3 times the city average. You've got Presidio Bay Ventures turning a 60-year-old building on Spear Street into what they're hoping to become the first office resort in the country, rooftop bar restaurant, onsite medical services, a health spa, fitness center. You've got the newly opened J Hotel and incredible restaurant and bar offerings there. You've got the new private Bank of Amador Club in downtown, and we're not even scratching the surface of what else is coming to other hubs or commercial hubs of the city, like many multi-billion-dollar mixed-use communities that are being built on Treasure Island and near Balboa Island and Mission Bay, China Basin areas. Pier 70, Dogpatch. Each of those is going to bring thousands of new housing units, acres of open park spaces, new hospitality spaces, restaurants, new office space. I've got a whole separate video on each of these developments. I'll link them in the description below. Definitely worth checking out so you can see what they look like and learn more about 'em. But aside from the development push and transformation of these office buildings, the city has done a really great job of attracting people back to downtown. The city has introduced outdoor entertainment zone areas in downtown where people, they're allowed to have open containers outside and they're hosting sponsored events in those areas to attract a bunch of people. And they've been wildly successful. Local businesses, Schroeder's, Royal Exchange, two events in the city's first entertainment zone in downtown on Front Street, you had Oktoberfest and Nightmare on Front Street. Each brought, you know, around 10,000 people to the area., and the local businesses that were sponsoring those events reported that sales in connection with those events increased between 700 and 1,500%. So they are really a boom to local businesses. And the city's hosting Downtown First Thursdays the first Thursday of every single month. These are free events with food and drink vendors, live music, artisans. They've been wildly successful so far. And the next entertainment zone was just announced at the 11-acre Thrive City outside of the Chase Center. That area is super nice, and there are a ton of new bars and restaurants servicing that space. It is a great spot for it. So there's so much happening across the main commercial hubs that wasn't really transpiring during and immediately after the pandemic that is really changing the landscape here and bringing people back to places where they used to go. Tourism is up compared to prior years. Hotel occupancy is up compared to the prior 3 years. People are coming back. In 2023, SF had over 23 million visitors, up 5% from 2022. And those visitors spent 18% more money than they did in 2022. Now, that's still below pre-pandemic levels, but the data is trending up, which is what we want to see. Microsoft has also committed to hold its annual Ignite conference in San Francisco at Moscone Center for the first time in its over 30-year history. Salesforce has also signed a new commitment keeping Dreamforce in downtown San Francisco as well, at least for the next 3 years. All of this is going to bring hundreds of millions of dollars and thousands of jobs to the city. And it's not just tourism. San Francisco's population, according to U.S. Census Bureau data, also grew in 2023. Still below pre-pandemic levels. But obviously what the city's been doing is working to get people back. And all of these trends have had a demonstrative impact on the housing market in San Francisco. San Francisco had among the largest price corrections of any major metropolitan market after the Federal Reserve started raising interest rates in early 2022. And that's largely because of all the layoffs and people leaving the city for the suburbs and other states. To work remotely. But over the past year, home prices across property types are up compared to prior year. And that's because there's more demand as more people are coming back to the city because in large part of these improvements that we talked about. The average and median sale price for single-family homes over the past year is up 5%, and the average price per foot for single-family homes in San Francisco is up over 3% over the past year. And that's true for condos too, which took an even bigger hit than single-family homes, and they've been taking a hit since the start of the pandemic. Condo prices are up 2% compared to last year. Price per foot up over 1% compared to last year. The condo market has been stagnating for years, so even these mild increases that we're seeing are a sign that that market is stabilizing as more people come back. Now, that's definitely not true everywhere. There are some places in San Francisco where the condo market still probably has some ways to go down, especially in like the SoMa, Yerba Buena areas, you know, south of the Financial District. There's just a ton of supply on the market and things are trading very slowly there. So there's probably some more room to come down in those areas. But generally speaking, citywide, the condo market is up compared to last year. Well, there you have it. Those are the biggest changes and dynamics we're seeing across the city that are having a net positive impact on the real estate market in San Francisco and why we should expect continued appreciation into 2025 and beyond. If you're thinking about relocating to the Bay Area, maybe you got a new tech job or you're being called back to the office and you have questions about all the changes that have gone on since you've left in the market, definitely reach out to me. I've helped people relocate in SF and Marin from all over the country, and I'd be happy to be a resource for you. I'll put my contact info information in the description below. Definitely reach out. And as I mentioned, if you want to learn more about the largest new developments in San Francisco and some things that are coming as soon as next year that are going to completely transform the city's landscape, I'll link videos about all of those things in the description below as well. Definitely check them out. I hope you enjoyed the video, and I'll see you in the next one. [FOREIGN LANGUAGE]