The clouds hanging over San Francisco since the pandemic appear to be finally lifting — leading to predictions of a real estate rebound.

Following years of emptying office buildings and vacated storefronts, Fog City is buzzing again, thanks to return-to-office mandates at Amazon, Google, Salesforce, and more. This is good news for the city’s apartment buildings — and now some professional investors are taking notice.

“San Francisco had become an unsavory city, but we believe we’re starting to see a real recovery and we think it’s a good time to buy,” said Tom Shapiro, the president and founder of GTIS, a New York City based real estate investment firm with $4.7 billion of assets under management.

Shapiro is predicting rents will grow between 4% and 6% this year and next. Property values, meanwhile, have declined 30% to 50% from their pre-pandemic highs, creating an attractive buying opportunity.

Asking rents in San Francisco were about $3,500 a month in the first quarter of 2020 and fell 25% by the end of the year as a result of the dislocation caused by the pandemic, according to estimates from the residential brokerage firm Compass. Average rents are now about $3,200 a month, closing in on pre-pandemic levels, including a 6.4% year-over-year jump in the first quarter, the Compass data showed.

Shapiro is also seeing growing competition in the space, including a nearly $100 million apartment property in the city that he said he is vying with three other bidders to purchase.

“There’s more people interested,” Shapiro said. “It’s not a secret like it was a year ago.”

Dealmaking is back

About $363 million of individual multifamily real estate assets were sold in San Francisco in the first quarter of 2025, according to data from MSCI, triple the dollar volume during the same period last year and the year prior. MSCI’s analysis omitted large, multi-property deals, such as Brookfield’s acquisition of a portfolio of more than 70 apartments buildings in the city in early 2024, because they can artificially inflate the data.

Eli Edwards, the US head of real estate equity investments at Fortress Investment Group, said it has acquired 13 rental buildings in San Francisco in the past two years. The firm is currently under contract to acquire two more rental buildings in the city and has offers out for several more rental properties. Edwards said he is looking to double the number of apartments in the firm’s portfolio there this year.

Edwards, who lived in the city’s Russian Hill neighborhood until recently, urged Fortress to become an early investor in the city’s turnaround because he felt that negative perceptions were overblown and that much of the homelessness and disorder associated with the city were focused in only a handful of areas, including its Financial District and the Tenderloin, a nearby neighborhood.

Edwards said the firm has signed over 20 leases in the last year with rents “about 10% above” what the firm had expected to fetch when the units were vacated.

“The Fortress DNA is, find a situation where the perception of risk is higher than the actual risk,” Edwards said. “That was San Francisco.”

Philip Saglimbeni, a senior managing director at Institutional Property Advisors, a commercial real estate sales firm, said he and his team recently found a buyer for Presidio Landmark, a 161-unit luxury rental building controlled by Brookfield through a long-term ground lease. Saglimbeni said the buyer was offering “north of a hundred million” dollars for the property, which is located in the Presidio, a national park south of the Golden Gate Bridge.

He declined to disclose the purchaser’s identity, saying the agreement was still being finalized, but said it was an “investment advisory shop.”

A spokeswoman for Brookfield declined to comment.

New inventory is scarce

The city’s anemic pipeline of new housing, which could raise rents even higher, adds to its appeal among investors, who believe the city’s scarcity of apartments will inflate rents.

A report by the San Francisco Planning Department that was released in April stated that 1,597 units of new housing were added in the city in 2024, 56% below the yearly average over the last decade. 1,024 units were permitted for construction during the year, 67% below the 10-year annual average.

“It’s a massive imbalance and it will be perpetual,” Saglimbeni said, describing the discrepancy between the demand for housing and new supply in San Francisco. “That’s what investors see and that’s why they gravitate to regions like this.”

The city’s beleaguered office market has also begun to improve, offering another potential boost to the apartment market’s recovery by luring in more workers who may want to rent apartments.

Office attendance in San Francisco recently reached about 43% of its pre-pandemic levels, according to employee swipe data from Kastle System, far above its record low of about 8% in 2020. 1.7 million square feet of space was leased in San Francisco during the first quarter, the most activity since 2019, according to data from the real estate services firm Cushman & Wakefield.

Early last year, Brookfield paid more than $600 million to acquire distressed loans tied to more than 2,000 apartments spread across more than 70 buildings in San Francisco and took ownership of the properties.

“When we made that investment, people weren’t going to the office, people weren’t going downtown,” said Mike Greene, a managing director at Brookfield who oversees its residential investments in the western US. “And that’s dramatically changed.”

Greene said that the 75 buildings in the portfolio now have a 95% occupancy rate, up from 67% when Brookfield took ownership.

“We feel pretty good about that,” Greene said.