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The Effect Of COVID In San Francisco's Real Estate Assets

  • Writer: Elisa Marconell
    Elisa Marconell
  • Jun 21, 2021
  • 2 min read

Pre-COVID situation

  • The San Francisco Bay Area was in December 2019 the nation’s strongest office market, with the highest asking rents and lowest vacancy rates, ahead of Manhattan and Seattle.

  • The residential market in the Bay Area and particularly in San Francisco and Peninsula (San Mateo and San Jose) is also strong, with rentals 2.5 times higher than US average and typical home values seen 6% CAGR growth over the last two decades.

COVID impact

  • Remote working has grown over the last years, however, has been accelerated with COVID-19.

  • The ability to work remotely is dependent on the type of industry, with Financial and Professional services having the highest ability to work from home (78%). A recent study by the University of Chicago indicated that San Francisco and the Peninsula are the top metropolitan areas with the highest share of jobs that can be performed remotely (45-50%).

  • Moreover, remote work is strongly advocated by Regional Agencies with the goal of reducing greenhouse gas emissions (e.g Metropolitan Transportation Commission)

  • The largest employers in San Francisco and Peninsula (including Salesforce with over 9,000 San Francisco workers, Facebook and Google) have announced that they will embrace remote work programs beyond the pandemic and will permanently allow workers to work from home. As a result, major employers are reassessing their office-space needs.

  • Remote working trends are also reinforcing the migration of residents from San Francisco and Peninsula into more affordable areas.


Real Estate Impact

  • San Francisco office vacancy rose in January 2021 to a 16-year high of 17.8%. And with major employers embracing remote work, these figures could increase further to over 30% .

  • In terms of residential property, according to the 2020 National rent report , San Francisco has been the US city most affected by COVID with rental prices reduced by 26% since March 2020.

Recommendation: Real Estate Asset Opportunities in San Francisco

  • Increasing office vacancies and decreasing residential rents in San Francisco are and will continue impacting Real Estate prices. This will present opportunities for consumers to purchase Real Estate, either for; residential (primary residence or vacation homes), commercial (office space) or investment and wealth management.

  • Eventually, the market would reach equilibrium and renters would come back to San Francisco, when it feels more affordable. From that point, real estate prices will continue growing at a high rate due to the attractiveness of the City and the low Real Estate supply (as a result of the limited land available).

  • Real Estate is a highly localized business and diligent approach is to provide Local knowledge to optimize research and due diligence. A Bay Area Real Estate research team should analyze and monitor closely the market trends, prices, and risk, in order to deliver attractive risk-adjusted returns to clients.


Works Cited:


1 Source: Colliers International office survey


2 Source: Apartment List


3 Source: Zillow Home Value Index All Homes





9 Source: Personal opinion informed by the University of Chicago potential of 50% and assuming 60% teleworking




 
 
 

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