Developers Revisit High-Rise Apartments as San Francisco Market Stabilizes

After years of dormancy, San Francisco’s high-rise apartment market is beginning to show signs of life. Developers who had paused large residential projects since the pandemic are once again reaching out to general contractors, signaling a potential shift in sentiment across the city’s downtown core.

Much of this renewed interest is concentrated in areas that had seen little to no large-scale residential development over the past several years. Recent data suggests the market fundamentals are starting to realign. Effective apartment rents in San Francisco have risen 6.3% year over year, outperforming every other major U.S. market, according to Colliers. Per-capita income has increased roughly 30% since 2019, reaching more than $176,000, helped in part by the return of higher-paid tech and AI workers.

Industry insiders report that large multifamily builders are once again fielding calls about high-rise apartment projects — the type of large, capital-intensive developments that had effectively disappeared from the city since 2020. Rising construction costs and expensive financing had previously pushed total development costs for towers close to $1 million per unit, making many projects financially unworkable.

That freeze may now be easing. Nationally, apartment units under construction are down more than 30% year over year, tightening future supply. In San Francisco, city leadership has responded by lowering some development barriers and expanding zoning allowances. Recent changes permit residential towers of up to 65 stories along major corridors such as Van Ness Avenue, a move intended to support long-term housing growth.

One of the earliest tests of this renewed environment is Crescent Heights’ long-planned residential tower at 10 South Van Ness. The 67-story project, expected to deliver close to 1,000 units, had been stalled for years due to high bids and costly debt. Its revival suggests that developers are once again evaluating whether high-rise construction can pencil out under current conditions.

Other proposals are also moving back into the pipeline. Safeway and Align Real Estate have submitted plans for approximately 3,500 apartments across four sites, including a high-rise tower in the Marina District. Lincoln Property Company is pursuing a mixed-use redevelopment at the Golden Gate University campus that would add hundreds of new residential units.

Despite the renewed momentum, challenges remain. Downtown foot traffic continues to lag, with Fridays accounting for the lowest share of weekly visits. Office vacancy rates remain elevated, exceeding 35% earlier this year. Construction costs for materials such as steel, aluminum, and concrete remain volatile, and lending conditions, while improving, are still tight.

Even so, the prolonged lack of new residential supply is creating pressure to move. With few projects breaking ground over the past several years, developers appear increasingly motivated to act before the next wave of supply materializes.

The return of these conversations does not signal a full recovery, but it does suggest a shift in direction. For those watching San Francisco’s commercial real estate market closely, the reemergence of high-rise residential development is a meaningful indicator that the city may be entering its next cycle.