Rent dropped I'd say 20%, maybe 25% in San Francisco
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@Diane G.
The increase in inventory could be conversion of Airbnb units to long term rentals. Anecdotally I’ve heard many Airbnb operators who aren’t able to get bookings do that to get some income in. When bills need to be paid many may be okay pricing low to fill the units.
No data yet on trend as far as I know but will be keeping an eye out. Supply flooding in the market will for sure drop rent, though will wait and see what the effect is once shelter in place is eased.
38 Replies
- Investor · San Francisco, CA · Member since 2017 · 14 posts · 7 votes6y
Depending on where your studio is located in the city, and what condition it is in, $3,000/mo sounds high regardless. I know 1/1 can go for $2,500 in outer parts of the city not directly near FiDi. I signed an extension recently on my 2/1.5 with no increase, I didn't want to risk losing a tenant who pays on time in this environment. Rentometer has $3,000/mo for a studio in the Marina area (I chose a random expensive area of the city) as too high. Is this kind of rent what you were getting a year ago?
Studio is in Russian Hill with direct view of Alcatraz....yes it was going for $3000 before the SIP...
While I am NOT surprised that I had to come down to $2800 to fetch a tenant, I AM surprised at how many listings seem to pop up at around $2200~$2400 in that same Russian Hill area...
- Member since 2020 · 437 posts · 675 votes6y
@Diane G.
My unit in lower pac heights just renewed for same terms as last year. Phew! It’s a 1 bed / 2 bath / 1 car top floor, nice views. I guess I got lucky. I have a few units coming up for renewal late fall and early winter. I am bracing up for some pain on those because they will coincide with big layoff season post Covid.
I concur that i think the full impact of COVID will be felt in the next 6-9 months...
What surprised me is that all these lowly-priced units popping up from nowhere in the last 4-6 weeks....
- Member since 2020 · 437 posts · 675 votes6y
@Diane G.
I am even afraid to think about the true impact of the post Covid life on SF real estate. Some of my units are in SOMA and East Cut and I bought them to align with expanding office space and tech employee base with the likes of Salesforce and Facebook buildings etc. Post Covid, I am not sure there will be that much office activity in SF. What do you think?
I think life will be back to normal in about 1 year, where people wont even remember what COVID was....
However, I never bought anything in SOMA and "East Cut" because I am afraid of earth equakes... The most I have bought into is 3 floor buildings....
@Diane G.
The increase in inventory could be conversion of Airbnb units to long term rentals. Anecdotally I’ve heard many Airbnb operators who aren’t able to get bookings do that to get some income in. When bills need to be paid many may be okay pricing low to fill the units.
No data yet on trend as far as I know but will be keeping an eye out. Supply flooding in the market will for sure drop rent, though will wait and see what the effect is once shelter in place is eased.
- 6yLawrence LeungBusiness MemberProperty Manager · San Francisco, CA · Member since 2018 · 97 posts · 80 votes
@Diane G. Good for you on getting someone in now albeit $200 less than what you hoped for. We currently have 8 vacancies on the market with another 6 more in the pipeline. We have not been as aggressive with our pricing and that has helped in getting a decent amount of inquiries. Unfortunately, the issue we are seeing is that almost all interested parties want to move in June or July. My guess is that they are trying to time the lifting of SIP and easing of restrictions. We are keeping our fingers crossed on trying to find folks that want to move in earlier, but may need to just approve and execute leases.
KeyOpp Property Management4.6287 Reviews Not the bay area, but one thing I noticed in KC was sudden rash of lower priced units on Craigslist were mostly scams. Ripped off from Zillow/hotpads for much less....quick glance you'd probably not notice unless you googled address. The other ones were typically inferior units (mostly outdated units bad location but with in a good location if that makes sense).
There were only a few legit lower priced ones that were mostly mom and pop landlords who probably didn't do good due diligence or care...
Originally posted by @Diane G.:
I agree with your "inferior unit" theory... Those do tend to be smaller/less updated units, but still surprised where all these come from ALL OF a SUDDEN....
I guess the AirBNB units maybe, as someone mentioned above?
I don't think it'd be many air bnb unless they were furnished, it'd be too hard/costly for it to make sense to get rid of everything needed for airbnb to get it rented.
I wonder if it's more of a these were supposed to be sold (vacant) but now they shifted back to rental as inventory levels creep up? Or are these listings all from professional PM companies, maybe they were waiting for more guidance from higher power in regards to SIP. I know this impacted some of my realtor friends as each company /office had diffent guidance on how to proceed...
- 6yLawrence LeungBusiness MemberProperty Manager · San Francisco, CA · Member since 2018 · 97 posts · 80 votes
@Matt K. it’s funny that you mention scams on Craigslist. I know they’ve always been around, but I have noticed an uptick since Covid-19. I don’t have the time to look for these myself, so how I monitor things is based on inquiries that I receive for properties we don’t manage but our name and reputation are attached to these listings that are quite frankly “too good to be true.” Thankfully most of the folks that brought this to my attention were savvy enough to Google me or our company to verify. I’m worried for the other folks that may have actually placed a deposit down site unseen. I have been tempted withWith law enforcement to call these listings, but perhaps for another time...
KeyOpp Property Management4.6287 Reviews - Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes6y
Originally posted by @Diane G.:
I agree with your "inferior unit" theory... Those do tend to be smaller/less updated units, but still surprised where all these come from ALL OF a SUDDEN....
It could be normal turnover MINUS the landlords feeling like they have the funds (or ability, when all the workers are "socially distancing" and/or making more on unemployment, with the $600/wk kicker, than they made working) to refurbish the property following a "meh" tenant moving out. Total speculation on my part.
- Member since 2020 · 437 posts · 675 votes6y
AirBnB laying off 2000 today. Lyft did a similar number last week. Uber on deck to announce soon. Right there is 6000 jobs gone. Likely not all are in SF but a majority likely are. More pain to come. Jobs = Tenants = Rents.
I don’t know how anyone can make a prediction that Covid will be in the rear view in about a year. I wouldn’t make such optimistic predictions. But, for the sake of humanity: I pray you are right.
I know of someone who leases a number of rentals in the Bay Area that are owned by investors overseas. He pays the owners a flat monthly fee (“rent”,) and rents out the SFRs through the likes of Airbnb, obviously furnished. His income is the rent arbitrage. Was, actually - he has no more bookings.
While the owners agreed to some concessions since March, he is still contractually obligated to pay them rent, regardless of his (lack of) income. I don’t think his crystal ball is telling him that he just needs to carry the loss across all these properties for 9 months - he’ll take what he can now, which suddenly includes long term tenants, furnished or otherwise. That is just one story, a kind I don’t read about on the news.
Some hotels have had to close. Others have furloughed some staff. They don’t have a lease option, and you can only drop the price per room so much before it makes no sense.
Math/motivation is different for everyone. I don’t do STRs, so, for me, this is anecdotal. But I wouldn’t discount that there is/will be additional competition for LTRs made up of formerly Airbnb-type properties. When you couple that with jobs losses and ever-higher ability/requirement to work remotely (for those who can) from locations that are cheaper, I absolutely expect to be looking at increased inventory for LTRs, especially in hot tourist markets. What kind of drop in rents that will translate into I have no idea. Glad you got someone already.
- Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes6y
Although I'm in Brooklyn, NYC, I thought I would share my experience on a re-rental I had done for a Move in Date of May 1st.
In late March, just a week before the lockdown, I placed an ad for a 1 Bedroom Garden Apt in Brooklyn's Bed-Stuy neighborhood for $2,450. The rent was just $50 less than the current tenant, but I wasn't sure what the Covid-19 was going to do to rentals.
Within 6 days, I had to pull the Ad off the listing as I got overwhelmed by over 40 inquiries. I normally tell people to apply ONLY if they had greater than 700 FICO and income of over 45 times monthly rent which would be $110k annual salary.
I had 5 inquires and choose a couple whose combined income was over $225k and had over $250k cash in the Bank. They moved in a few days ago.
I thought the experience was unusual because it looks like the rents SHOT UP.
In fact, I firmly believe that it's true that rents for that particular apt in my buildings are much higher now in the Pandemic.
I think this is that case because most of the buildings in NYC happen to be high rise buildings with Elevators. You can imagine that if you are trying to be cautious from getting Covid-19... riding in an Elevator where anyone can pop in and sneeze basically passes it on to you.
Most management of these larger buildings also prohibit the moving in and out of Tenants at this time. They don't want movers and other strangers in the buildings. That eliminates competition for available apts. Even physical showing are prohibited.
My Garden Apt has it's own entrance and I saw many people who are in sky rise apts with dogs in particular. You MIGHT be able to self-quarantine in an apt if you don't have a dog. BUT, if you have a dog, you MUST walk the dog. Therefore, any apt with outdoor space is incredibly desirable.
Regardless, in regards to Covid-19... my bet now is that you can advertise your apts as being "Pandemic Resistant" if you are surrounded by Sky rise buildings with Elevators.
I'm not sure of your particular neighborhood, but I find this to be the case with NYC in general.
If you are in a high density area, which I believe SF is... AND your apt is either isolated or in a non-elevator building, it may actually be very desirable during the Pandemic (and I fully believe beyond the Pandemic because these thoughts will linger).
Hopefully this translates to SF and helps!
- Member since 2020 · 437 posts · 675 votes6y
@Llewelyn A.
Thanks for sharing. Had a similar conversation with a realtor friend in Manhattan and she pondered the trade off between climbing up/down the elevator and walk 15 mins to the office OR live 45 mins away i
outside of Manhattan in a garden apartment or townhome and take a crowded subway to work everyday/twice a day to get to work. I think demographics will play a big role as will employers willingness to make remote work easy and flexible and acceptable once Covid is past. To me, The younger crowd with more immunity will stay on in the city post Covid . The older crowd with families will contemplate a move.
- Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes6y
That's EXACTLY the way I think it will unfold.
The Young will stay in the Cities and the old will move to either areas in the City that are very less densely populated, for instance, Ditmas Park in Brooklyn, or will move out of the City entirely.
That actually NEEDS to happen. Older people will need to work more remotely so as to NOT take the Subway.
I think the smart Investor will realize this if they don't already.
So I have NOT seen anywhere close to a 20% drop in SF rents. For me it’s been 5-10%. And I also have NOT seen a big rise in inventory- same in one, and a moderate rise in another. You need to be careful about extrapolating based on anecdotal info of your single rental!
I will say that’s it’s been a royal pain in the āss dealing with turn over now. I have my units priced attractively, so I am seeing good response. My challenge is a Specific one, as I’m insisting on top notch tenants in a less popular neighborhood in SF, so while the unit and price are nice, a lot of peeps pass it up due to location. But I just wait until the smart person realizes it’s a good deal, and actually a cool evolving neighborhood :)
As for Airbnb's hitting the S.F. market, the bulk was already absorbed 2-3 years ago when the city cracked down very hard on STR. Most Airbnb's have been mid term/corporate in the city, and the volume is a lot lower (IMO) than what STR was a few years back. I know several mid term operators just holding off for now (they can weather the storm). There is a disincentive to go long term for many reasons- the investment in all the furnishings goes up in smoke, they risk getting stuck with long term rent control tenants, etc. Overall I think mid term units will have a moderate effect On rental inventory.
What I do wonder is how aggressive the larger new construction bldgs will be to fill vacancies. These higher end units are definitely taking a hit in rent (as people get more practical and downsize on glitz and superfluous amenities.) But these properties also have the problem of having to lower everybody’s rent, if they start dropping prices on empty units aggressively. It seems to me they prefer having higher vacancies than drop rents across the board. But I don’t have enough direct insight into their operations to say conclusively.
Lastly, I don’t think city loving people are going to run off en mass from prime cities and into the burbs (although sentiment in NYC may differ as it was hit hard with corona). think about it- SIP for single young professionals in the burbs must really suck- you have little/nothing walking distance, and a lot of “recreation” areas have closed down parking lots to outside visitors. At least in SF you can still walk everywhere, including parks, plenty of good food pick up options, etc. In the burbs it’s basically Netflix and Domino’s 🍕...I’ll pass :)
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my2c
On your new build comment, I have a friend that moved into Etta last year in Aug... At that time, there was a grand total of 1 vacant unit in the building, and he felt super lucky to get in...
Now, there are 20 units vacant....There are 107 units in the building so that is a 20% vacancy rate
- 6yLawrence LeungBusiness MemberProperty Manager · San Francisco, CA · Member since 2018 · 97 posts · 80 votes
@Diane G. SOMA, East Cut, Yerba Buena, China Basin and Mission Bay condos are my fear at the moment based on your comment above and with the increasing layoffs that are taking place this week across the Gigeconomy including, but not limited to Lyft, Uber, Airbnb the inventory is going to only increase further. My biggest fear is how many ppl are going to walk away from lease obligations as the job market has completely dried up.
We have two condos vacant and the competition is fierce. We do a thorough job looking at comparable units to price our vacancies, but will decrease the price $100/week until we see a sweet spot with inquiries. Based on this, our decreases are in line with what @Amit M. is seeing with single digits up to at most 10%.
KeyOpp Property Management4.6287 Reviews So last year, when I put a price cap at $3000 in pac height/russian hill, the search usually returned 1-2 listings... today, you get 100+ results....
I dont know what explains that, but it is a hard fact....So, ugh.....
@Diane G.
Yes, seeing this in the local area. There are big institutionally managed apartment complexes that have been dropping the rent by 10-15%.
These same companies have traditionally increased the rent by 20-25% upon lease renewal Year 2.
They will probably bring the new tenant to market rent upon lease renewal.
These are 100+ unit high end operators and probably looking to fill the inventory.
- Member since 2020 · 437 posts · 675 votes6y
To me it comes down to jobs. The fact is between uber, lyft and AirBnB we may have lost about 5k SF jobs. I know of plenty of startups ready to implode by July given present trends. It’s not like other companies are hiring for these folks to get absorbed quickly. We may not be at 25% rent declines now but it’s coming fast especially once you start counting the discounting in the new developments that will happen. On the positive side, longer term, WFH trends will mean more young people can easily live and work in the city vs having to go up and down 101 every day.
- Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes6y
Could it be that a number of people broke their lease, knowing that $ 1200 stimulus payment wasn't going to make a dent into the high rent amounts in the city? Moving back in with relatives or renting rooms or couples split up due to the stress of seeing each other 24hr/day?
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