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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.

San Francisco has emerged as the nation's leading office property sales market, completing a swift turnaround from a period of high vacancy and market uncertainty. According to data from real estate services firm Avison Young, the city logged $4.7 billion in office property trades across 147 transactions through the third quarter (Q3), topping all 12 major U.S. markets. This total surpassed New York's $4.4 billion (90 deals) and Los Angeles' $2.7 billion (146 deals), signaling a dramatic shift in investor sentiment toward the city's commercial real estate (CRE). Key Market Metrics The recovery is underpinned by key financial and transactional milestones: Sales Volume: Q3 marked the first quarter since 2021 where office sales volume exceeded $1 billion. Pricing: The average price per square foot saw a 50% year-over-year increase—the first such rise since 2019. Despite this increase, many buildings are trading at a deep discount to pre-pandemic values, which Avison Young's head of U.S. investment sales, James Nelson, described as a "rare entry point." Long-Term Outlook: If current momentum persists, property values are projected to return to pre-pandemic levels by 2030. AI Sector Drives Leasing and Confidence The primary catalyst for the rebound is the explosive demand for space from the Artificial Intelligence (AI) sector, which is reducing available sublease space and stabilizing occupancy. AI Leasing: Deals tied to major AI companies, including OpenAI, have fueled significant leasing activity. AI-related firms are concentrated in areas like South of Market (SoMa), often seeking flexible, ready-to-use Class A/Trophy office space. Sublease Reduction: The AI boom is absorbing a considerable amount of formerly vacant space, particularly in the sublease market, which is critical for market stabilization. Investment Profile: The investment is characterized by both entrepreneurial players, such as Roger Fields of Peninsula Land and Capital, and large institutional buyers, like New York Life, betting on future cash flow growth. Lingering Risks and Nuances While investment sales are surging, the underlying leasing fundamentals show a more nuanced picture that raises some long-term questions: Valuation Worries: The concentration of large deals linked to the AI sector has raised concerns among some observers that a portion of the market's recovery may be running ahead of broader economic fundamentals, echoing past technology boom-and-bust cycles. Hiring Softening: Recent research from Stanford indicates a softening in early-career tech hiring, suggesting the boom's effects are not uniform across the job market, even as overall job growth continues. Vacancy/Availability: Despite the sales surge, San Francisco's total office vacancy rate remains high—above 30% in Q3, though Class A and Trophy assets are performing significantly better. Broader Confidence and Civic Engagement The renewed confidence extends beyond private investors. San Francisco city officials targeted and acquired the 1660 Mission St. building for the Department of Public Health, indicating a move to secure properties before market appreciation erodes bargain opportunities. Furthermore, Mayor Daniel Lurie's administration is credited by major landlords with improving the relationship between City Hall and the business community, contributing to a noticeable increase in "city energy," according to observers who note fuller streets and a clearer civic agenda.

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AAPI Event

Networking, enjoying and making deals on a hot summer day

Another great event to catch up with all the professionals in the Bay Area

We discussed the commercial real estate of the Bay Area. Professionals assert that AI has played a key role in the recovery of the office market.

Welcoming incoming Berkeley HAAS students at Lake Temescal.

Congratulations to the organization team of the Future Summit. Delightful networking opportunity that brought together an impressive array of future tech investors, venture capitalists, and industry leaders.

What an unforgettable KW Summit! Each year it’s a joy to reconnect with longtime friends, meet incredible new faces, and celebrate everything that makes our KW family so special. This year was extra meaningful as I had the honor of joining the stage as a panelist—sharing, learning, and laughing together. Until next year! KW Summit 2025 Panel KW Summit 2025 Audience Aziz Khatri

July 24 2025, Rotunda, Oakland CA We had the honor of experiencing a live performance by BANDALOOP , the global pioneers of vertical dance , right here at Frank H. Ogawa Plaza in Oakland . Suspended high above the ground, these incredible artists merged dance, climbing, architecture, and public space  into a performance that celebrated courage, creativity, and community . At Artizan Commercial Advisors , we’re proud to support experiences that elevate both art and urban space. Congratulations to BANDALOOP for a stunning show that reminds us all:🪂 The sky is not the limit.