San Francisco Rent Drops Most On Record
Plenty has been written about the rise of remote work and subsequently, the effect it may have on driving people away from cities to less expensive locations.
As a result of the coronavirus, companies are increasingly warming to the idea of remote work becoming a permanent aspect of employment. Twitter notified its employees they can work from home permanently if they wish to, while Facebook said it sees a future where its employees will be predominantly working remotely.
With the movement to remote work being led by technology companies, it's not surprising that San Francisco real estate is starting to show signs of weakness.
Apartment rental platform Zumper released data showing that rents in San Francisco declined by 11.8% in June from the same period a year earlier. The nearly 12% decline was the worst in the U.S. and marks a new record decline for San Francisco.
The median rental price for a one-bedroom apartment in San Francisco dropped to $3,280 from $3,720 last June. June's decline is worse than May's year-over-year decline of 9%, which was also a record decline at the time.
"Zumper has been tracking rent prices across the country for over five years but we have never seen the market fluctuate quite like this," Zumper co-founder and CEO Anthemos Georgiades said. "For example, rent prices in San Francisco have historically only gone up and typically only incrementally, yet now we are seeing double-digit percent rent reductions. This is unprecedented for this generation of renters."
Georgiades explicitly referenced the moves by technology companies to support remote work as a reason for San Francisco's declining rent prices.
"The very real move of many mainly technology employers to a future of remote work, meaning millions of employees now looking outside of dense metropolitan areas for their next home now that their commute time is no longer a factor," Georgiades said.
Declining rent prices don't appear to be taking place across the U.S., as Zumper's survey showed one- and two-bedroom rent prices rose 1% and 0.8%, respectively, in June.
Calling it the "Brooklyn Effect," Zumper also noted rent prices are increasing in cities within proximity to major cities that are seeing rent prices decline. For example, the median rent in Sacramento—which is about a 90 minute drive from San Francisco, is now up 7.9% on an annual basis.
Schery Bokhari, an economist at Redfin, also acknowledged the trend that is taking place.
"The jump in inventory in San Francisco may indicate less desire for homes in the expensive urban center as buyers envision a permanent shift towards remote work and seek out larger homes and affordability further from the city," Bokhari said.
With the rise of remote work seemingly inevitable at this point, this trend should continue in San Francisco as well as other major cities in the years to come.
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