Color from the red hot San Francisco multifamily market: - rents are up city-wide 25-30% YTD, but have flattened recently (healthy) - pockets are still rising, mostly in downtown/soma and new construction that has lagged the recovery in rent control stock - institutionally-backed operators are competing on limited deal-flow, as deployment pressure is driving down cap rates - one off institutional size rent control deal cap rates are now solidly under 5% and dropping (rates rates rates blah blah blah) - more new construction deals are now hitting the market, some owners having survived post-COVID better than others - huge price per unit sale prices but all well below replacement cost - one new construction deal is being flipped off a 2024 basis, going for a 2x on value - the sub-institutional investment market is spotty - higher rates are being felt here as buyers are more reliant on financing to fund deals and care more about cash flow (weird) - politically, it’s cool to hate landlords again. The “rent emergency” measures are a nothingburger but sentiment matters for future policy - the development pipeline is ramping thanks to higher rents, deliveries expected to start in 2028-29, but high financing and construction costs will new supply’s impact on the market - behind all this of course is the AI narrative, with big IPOs on the horizon, hiring outstripping layoffs, but everyone a bit more nervous than they were a year ago because no one in SF multifamily likes a spotlight (nor should they)

Sometimes I wonder why random people with no connection to SF hate it so much. Other times I know exactly why. Imagine a guy pledging to invest $100 million into a forgotten retail strip - in the neighborhood he grew up in - through a privately-funded nonprofit and being accused of a “hostile takeover” by arguably the most influential local politician. Now imagine the guy wants to do it in literally any city besides San Francisco. They’d throw him a parade - and rightly so. You hear a lot that San Francisco hasn’t lived up to its potential because of anti-growth politics. I disagree. It’s a miracle San Francisco isn’t worse off given the entrenched anti-growth politics of the past 50 years, with periodic respites like the present moment.