Commercial Property Loans in San Francisco, California

Economy in Review

San Francisco's economy is diverse and thriving, with a strong focus on technology and innovation. The city has a high cost of living and doing business, but it also offers a highly educated workforce and a robust job market. According to the Bureau of Labor Statistics, the unemployment rate in San Francisco is lower than the national average. The city's economy is expected to continue growing in the coming years, driven by the technology sector and other industries.

Multifamily Market

San Francisco's multifamily market is highly competitive, with a limited supply of available units and high demand from renters. The city has rent control laws that limit rent increases for existing tenants, but new construction is not subject to these regulations. According to the U.S. Census Bureau, the median rent in San Francisco is higher than the national average. Despite the high cost of living, the city's population continues to grow, which is driving demand for multifamily properties.

Office Market

San Francisco's office market is dominated by technology companies, which account for a significant portion of the city's job growth. The demand for office space in San Francisco is high, but there is limited supply due to zoning restrictions and high construction costs. According to real estate data firm CoStar Group, San Francisco has one of the lowest office vacancy rates in the country. The city's office market is expected to remain strong in the coming years, driven by continued growth in the technology sector.

Industrial Market

San Francisco's industrial market is relatively small compared to other major cities, due in part to the city's limited land availability and high cost of doing business. However, there are still opportunities for investors in certain submarkets, such as South San Francisco and Oakland. The city's proximity to major ports and transportation hubs makes it an attractive location for logistics and distribution companies.

Retail Market

San Francisco's retail market is diverse and vibrant, with a mix of local boutiques and national chains. The city's high cost of living and limited space make it challenging for retailers to operate, but those that do can benefit from the city's affluent population and strong tourism industry. According to the San Francisco Chamber of Commerce, the city's retail sales have been steadily increasing in recent years.

Self-Storage Market

San Francisco's self-storage market is relatively small compared to other major cities, due in part to the city's limited land availability and high cost of doing business. However, there are still opportunities for investors in certain submarkets, such as South San Francisco and Oakland. The city's population density and high cost of living make self-storage facilities a valuable commodity for residents who need extra space.

Hospitality Market

San Francisco's hospitality market is strong, driven by the city's status as a major tourist destination. The city has a diverse range of hotels, from luxury properties to budget accommodations. According to the San Francisco Travel Association, the city welcomed a record number of visitors in 2019, generating billions of dollars in revenue for the local economy. Despite the challenges posed by the COVID-19 pandemic, San Francisco's hospitality industry is expected to rebound in the coming years.

Commercial Real Estate Loans by Purpose

There are many types of loans available for commercial properties in San Francisco, and the best fit for you depends on your investment strategy. Here are some broad categories of financing available.

Permanent Financing

Permanent financing is a type of loan that remains in place for an extended period of time. It's commonly used to finance the acquisition of commercial properties or to refinance existing debt. Types of permanent financing include bank loans, loans from government-sponsored entities like Fannie Mae and Freddie Mac, HUD loans, credit union loans, loans from life insurance companies, commercial mortgage backed securities (CMBS) loans, and other types of loans depending on the specifics of the commercial property.

Refinancing a Commercial Real Estate Property in San Francisco

I wouldn't quite call this a separate type of loan, but I have to mention refinancing in here. These are typically permanent loans (but not always) used to pay down an existing, partially amortizing or interest-only loan.

Often you may be able to time a refinance to happen after an interest rate drop — an ideal solution — but if your loan is maturing during a period of higher rates, you shouldn't stress too much about this. We'll work with you to find the best loan terms for your commercial property by reaching out to potentially thousands of lenders. Just complete the form below, and we'll get to it.

Construction Financing

Construction financing, also known as interim financing, is used to finance the cost of construction for commercial properties. It is usually a short-term loan that covers the cost of land development and building construction. Once construction is completed, the borrower can typically convert this into a permanent loan or pay it off with a new loan.

Bridge Loans

Bridge loans are a type of short-term loan that can be used to cover costs in the interim period between the end of one loan and the beginning of another. They are typically used in commercial real estate to finance the transition between construction financing and permanent financing. Bridge loans generally have higher costs than most other financing options and are often interest-only and non-recourse.

Commercial Real Estate Loans by Type

Depending on the purpose of your loan, you will have several financing options available to meet your investment goals. Read below to learn more about specific loan types.

Bank Loans

Bank loans are a common financing option for commercial real estate in San Francisco. They can offer competitive interest rates and flexible terms, but the specifics can vary greatly from bank to bank. While they may not always be the best fit for larger, more complex projects, they can be an excellent option for smaller, simpler properties.

Life Company Loans

Life company loans are typically used to finance high-quality assets in major markets. They generally have lower loan-to-value ratios than most other loan types but offer competitive interest rates and long terms. However, they may not be suitable for riskier projects or properties in less established markets.

Agency Loans

Agency loans, offered by government-sponsored entities like Fannie Mae and Freddie Mac, are typically used for properties that are mostly multifamily. They offer attractive loan terms, low, fixed interest rates, and are non-recourse. However, there are restrictions on the amount of income that can come from other commercial uses.

HUD Loans

HUD multifamily loans are government-backed loans that are primarily used for the construction, substantial rehabilitation, purchase, and refinancing of multifamily properties. These loans offer long-term, non-recourse financing with competitive interest rates but have extensive requirements for qualification.

CMBS Loans

Commercial Mortgage Backed Securities (CMBS) loans are a type of mortgage-backed security backed by commercial real estate loans. Lenders focus more on the strength of the property than the borrower's credit, making them a good option for properties with strong cash flow.

SBA Loans

Small Business Administration (SBA) loans, such as the SBA 7(a) and SBA 504, offer attractive financing options for small businesses. However, the maximum amount for an SBA 7(a) loan is $5 million, while SBA 504 loans can go up to $20 million. They cannot be used for multifamily properties and are only available for properties that the business owner occupies.

Mezzanine Loans

Mezzanine financing is a hybrid form of financing that combines elements of debt financing and equity investment. It is typically used in commercial real estate to fill a funding gap between the primary loan and the total cost of a project.

Commercial Property Insurance in San Francisco

This part isn't about loans, but it's just as important to your investment's success. Let's talk (quickly) about insurance.

Insurance premiums have skyrocketed in the past few years, as I'm sure you know. While multifamily gets a lot of the attention, rates for insuring anything from office buildings to shopping centers have jumped significantly.

Janover Insurance Group is dedicated to finding the best insurance solutions for your commercial real estate assets in San Francisco. Click to get a free insurance quote for your property — no obligation.