South Bay rents surge back to pre-pandemic levels, as San Francisco lags behind

Rents in San Francisco remain lower than before COVID-19.

South Bay rental prices are surging back to pre-pandemic levels, leaving San Francisco as the last large metro area in the country where renters are paying less for an apartment than before the onset of COVID-19, according to a new report.

In the months after the pandemic hit in March 2020, rental prices in many of the Bay Area’s core cities cratered as more people began working remotely and fled to the suburbs or areas outside the region. Prices ticked back up but had failed to fully rebound, even as rents in other large cities across the country soared to record highs after initial drop-offs.

“The Bay Area had really the deepest cuts in prices and some of the slowest returns,” said Rob Warnock, senior research associate at rental site Apartment List, which produced the report. He cited the region’s high number of “remote-friendly” workers as a main cause.

But as more of those white-collar employees return to the office, inflation ripples across the broader economy and rising mortgage rates squeeze would-be homebuyers, rental prices in some of the Bay Area’s densest population centers, in particular Silicon Valley, are getting more competitive — while rents in individual cities including San Francisco and Oakland are lagging behind.

San Jose metro has over the past six months seen median rent prices spike 11% — the largest increase of any large metro in the country during that period — with the monthly cost of a one-bedroom apartment hitting $2,233, the nation’s highest metro area rent, according to the report.

That’s a 3% increase over San Jose’s March 2020 median rental price, which the metro eclipsed in May. Rents bottomed out at 17% below pre-pandemic levels at the end of 2020.

The Apartment List report estimates median rents across new leases signed in a given month.

Last year, vacancy rates for both the San Jose and San Francisco metros returned to around 5% and are now falling even lower after reaching near double digits during the depths of the pandemic, according to Apartment List data, suggesting renters are increasingly coming back to the areas. That mirrors vacancy rate drops in other pricey urban regions as most public health restrictions on restaurants and nightlife have been lifted.

“We’ve sort of completed the cycle here in the Bay Area,” Warnock said.

Even so, rents in the San Francisco metro haven’t quite returned to where they were before the pandemic, with prices 1% lower than March 2020, and a one-bedroom apartment currently going for $1,939 a month.

San Jose and San Francisco had been the last two of the country’s major metros not to see rental prices return to pre-pandemic levels. But with San Jose’s recent surge, that distinction now belongs to San Francisco alone.

Still, median rent prices for the San Francisco metro, which includes the East Bay and the Peninsula, have remained on a mostly steady upward trajectory since dropping 15% from March 2020 to December 2020.

In the city of San Francisco, however, rental costs have been much more sluggish, currently a full 10% below pre-pandemic levels after falling 26%. The cost of a one-bedroom in the city is $2,331.

Rents in Oakland, which is included in the San Francisco metro area, are down 9% since before the pandemic to $1,559 for a one-bedroom.

Andrew Collins, chief executive of San Francisco-based rental platform Bungalow, which caters to young professionals and has over 1,200 listings across more than 20 markets around the country, said he is seeing the same trends for the Bay Area in his company’s data. He pointed to growing concerns about crime and other quality of life issues as possible reasons the San Francisco rental market has been slower to rebound than in South Bay cities. Additionally, renters are looking for backyards and more space, Collins said, which can be easier to find in the Silicon Valley area.

He said shifts in remote work could also be at play.

“You’re starting to see Big Tech mandate back workers (to the office), so I expect that to have a pretty real impact,” Collins said.

Warnock with Apartment List noted more suburban parts of the Bay Area, especially in the North Bay, saw rents skyrocket over the past two-plus years as urban residents sought new lifestyles outside the city. In the Santa Rosa area, for instance, the cost of a one-bedroom is up 20% since before the pandemic to $1,540 in June.

“As you move outward (from the Bay Area’s core), you find that rent discounts were smaller and you find rent increases have accelerated faster from pre-pandemic levels,” Warnock said.

Going forward this year, Warnock expects increasing wages, growing construction costs for new apartment buildings and the general “inflationary nature of the economy” to continue pushing up Bay Area rent prices.

Another pressure is rising mortgage rates, which for a 30-year fixed mortgage are averaging around 6%, about double the rate throughout most of the pandemic. The growing cost of borrowing could convince more people to continue renting instead of entering a Bay Area real estate market where the median single-family home price hit $1.54 million in April, according to the California Association of Realtors.

“The for-sale market and the unaffordability of it definitely makes matters worse for folks who are out there competing on the rental market and finding prices are rising quickly,” Warnock said.

The most expensive large metro areas to rent a one-bedroom are: San Jose ($2,233), San Francisco ($1,939), New York ($1,890), San Diego ($1,890) and Los Angeles ($1,739).