Darrell Hudson

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Tech and the San Francisco Rental Bubble

A sample list of apartments for rent in SoMa, an area of San Francisco with trendy lofts.

I’ve recently learned that real estate brokers in San Francisco have reached a consensus on a topic that entrepreneurs and investors can’t seem to agree on: that we are in the midst of a technology bubble.

Technologists have been debating the existence of such a bubble for over a year now, but they just can’t seem to agree. Some argue that companies like Twitter, Facebook and LinkedIn, are overvalued with multi-billion dollar valuations. Others say that technology companies are actually undervalued.

Real estate brokers in San Francisco have seen the evidence of a new dot-com style bubble: Rents are shooting up as the demand for apartments grows. As a newcomer to San Francisco, I can attest to how frantic the search for apartments has become in the area, and to the often audacious pricing of rental properties.

An article published on Thursday in The San Francisco Examiner notes that Bay Area renters are now seeing rent hikes that are eerily similar to those during the dot-com bubble that occurred a little more than a decade ago. RealFacts, a real estate analysis firm, told the Examiner that a new wave of San Francisco residents who work for technology giants and start-ups seemed to be responsible for the rise in apartment rental costs.

Real estate brokers I’ve spoken with note that although the San Francisco market has always been challenging for renters, the current state of affairs is extraordinary.

Ms. Kuchar of Curbed said rents were also rising because more landlords were choosing to turn their properties into short-term rentals using services like AirBnB, a company that lets people rent out their spare bedrooms or homes to travelers.

“A lot of residential property owners are now converting their long-term rentals into vacation rentals; that has also depleted the market,” Ms. Kuchar said. She also said that though high real estate prices make it clear there is a new bubble in Silicon Valley, no one can really predict how long it will take before it pops.

By NICK BILTON

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