San Francisco market finally starts to rebound

In addition, JLL says the rise in the return to office, combined with the market’s resilient venture capital funding and burgeoning AI sector, should fuel hotel demand in the future, particularly from increased conferences, industry events and transient business travel. San Francisco’s AI sector is booming, with 92 new AI company office leases in 2024 (up 163% from the previous year) and 80 more projected for 2025.

This is creating a timely opportunity in the market to capitalize on the scarce new supply. San Francisco’s hotel supply growth has been heading downward since 2019 because of ongoing supply chain disruptions, high construction costs and financing challenges. The JLL study saw supply growth is projected only to grow 0.8% in the next four years, 77 basis points less than the market’s long-term average since 2000.

JLL says hotel investment is poised for a rebound from historic lows with private equity set to return, political leadership changes, and a significant pricing reset expected to renew interest in full-service hotels, which are currently 45% below their long-term average. In addition, hotels can currently be acquired at a substantial discount to replacement costs: 78% for full-service hotels and 31% for select-service properties. The study says this will present a unique opportunity for investors to acquire hotels at a significant discount.

The study also said foreign investors are now returning to San Francisco’s hotel market, with buyers from Europe, Singapore, the Middle East and South Korea leading the way and gearing up to acquire luxury assets.

JLL said recent political changes are creating a more business-friendly climate and various economic indicators are fueling significant tailwinds for the immediate and long-term future. San Francisco raised nearly a fifth of U.S. venture capital funding in 2024 and has major upcoming events, including the 2025 Microsoft Ignite Convention, 2026 FIFA World Cup matches and the 2026 Super Bowl.