The AI Boom is the “Latest Gold Rush” in the Bay Area
by Carole VanSickle Ellis
Long before San Francisco, California, was founded as a Spanish mission in 1776, its large, natural harbor attracted residents undeterred by the somewhat inhospitable geography, and the Ohlone tribe named it Ahwaste, which meant “place at the bay.”
The local population remained small as first the indigenous tribes, then Spain, then Mexico, and then, finally, the United States lay claim to the area, and the real estate remained widely available until the California gold rush in the late 1840s and early 1850s, when the population increased by more than 24,000 in just about two years, leaping from just over 400 in 1847 to 25,000 in December 1849. Buildings sprang up so quickly portions of the harbor were filled in to create new places for construction, and the rampant population growth sparked a tsunami of entrepreneurial activity and economic expansion.
Following that explosion of growth, San Francisco never really slowed down, although natural disasters and associated great fires did repeatedly necessitate mass rebuilding.
Since the 1990s, San Francisco has been a national technology hub, weathering the dot-com boom and bust and serving as a home base for social-media behemoths like Facebook and X (formerly Twitter) and internet titans like Apple and Google in the mid-2000s. Today, artificial intelligence (AI) has emerged as what Real Deal columnist Christopher Neely calls “the latest California gold rush,” driving already astronomical home prices even higher in the post-pandemic market, which, prior to about 2023, was experiencing a slight COVID lull.
Areas of the city like Mission Bay, where OpenAI occupies roughly 1 million square feet previously inhabited by DropBox, Uber, and Old Navy alongside Nvidia and Coinbase, have what Neely refers to as “gravitational pull” for both startups and established entities like the University of California San Francisco, which recently spent nearly $1 billion to expand its school of dentistry in the area.
With AI employees making base salaries around $500,000, the competition in Mission Bay, in particular, but also in the wider San Francisco market is fierce. Rents are often pushed over asking by $1,000/month or more, and property managers are simply contacting top applicants and offering them the chance to “stand out,” reported local agent Milan Jezdimirovic. Then, “they just start bidding against each other,” he said.
Area AI is Booming
Condominiums and single-family properties are also experiencing their share of the meteoric rise in values. According to Compass, the median price for a condo rose more than 13% in the past year alone, and median single-family home values have risen more than 16% in the past year, topping $2 million. San Francisco’s southeastern district, adjacent to the bay and packed with loading docks and warehouses, is in particular demand and has become known as “Area AI” since OpenAI’s move into the district. Not only is Mission Bay booming, but adjacent neighborhoods are also benefiting from their proximity to the heated market. However, all is not necessarily quiet in the Area AI suburbs.
“As San Francisco becomes the sizzling hot nexus of the global AI revolution, ambitious young entrepreneurs are flocking to hatch their startups at hacker houses,” wrote Business Insider senior correspondent Ben Bergman in April 2025. Hacker houses are single-family homes often sponsored by venture capital firms that offer would-be founders the chance, as Bergman described it, “to eat, breathe, and sleep, developing their startups while also making time for hackathons, raves, and pitch sessions.”
The migration into San Francisco of such a large high-income, professional population in such a short period of time has also created a phenomenon some local agents are referring to as “the mansion shortage,” which has been fueled by the competition between wealthy buyers and venture capital firms for the same limited number of extremely high-end residences.
Hyper-bidding, now also referred to as “bidmaxxing,” is the process by which a high-end home sells for more than $1 million over its asking price. This is occurring with increasing frequency as would-be homeowners try to “beat” the lockup periods for newly public companies and make a purchase before employees are permitted to sell their shares in the company.
“I have had a lot of young VCs say, ‘I have to get into a house before the Anthropic, OpenAI, and SpaceX lockup periods are over,” reported Compass buyers’ agent Michael Bellings. Currently, he noted San Francisco single-family homes are selling, on average, about 25% over asking (vs. 10% over asking just last year).
“There is more fear than ever and more throwing caution to the wind than ever,” Bellings concluded. In June 2026, there were 44 hyper-bidding events in San Francisco, compared to just eight in the entire first half of 2025.
An Ongoing Affordability Crisis Keeps Spreading
Perhaps not surprisingly, as San Francisco booms and housing shortages intensify, the city’s ongoing housing affordability crisis has deepened. “Supply alone will not help the most vulnerable San Francisco households,” warned the Bay Area Economic Institute in a report published in 2016. That prediction certainly held true both before and after the COVID-19 pandemic, as many analysts blamed policies intended to increase affordability for rising housing costs. Simply establishing benchmarks for developers to include a certain number of “below-market-rate” housing units, for example, fails to pack a punch when market rate is astronomically high and rising.
The issue is further compounded by San Francisco’s lack of available space for new construction and strict development regulations, which include density restrictions to prevent developers from overpacking their projects with units. The city even attempted to discourage real estate investor activity with an “anti-speculation” tax policy that would tax landlords who sold multifamily buildings they had owned for less than five years, but that measure was roundly defeated for the first time in 2014 and has not successfully launched since.
For now, super-rich buyers continue to flood into San Francisco, inflating home prices, fighting fiercely for the limited number of available properties, and pouring redevelopment money into neighborhoods like the Dogpatch in an effort to create new spaces for their families to live and their businesses to operate, even if it means buying multimillion-dollar homes in all-cash transactions.
“The city is booming. It’s on fire,” local agent Zara Rowbotham told The New York Post in August of this year. She added, “I do not see it going down anytime soon because of the location, the weather, the people.”
SIDEBAR 1
By the Numbers
1,700 // The number of AI companies operating in San Francisco has increased by 1,700% since 2022. The Real Deal
700 // The square footage taken up by AI companies in San Francisco has grown by roughly 700% since 2022. The Real Deal
42 // Currently, San Francisco single-family homes in Area AI are selling for 42% over asking price. Compass
7.3 // The percentage condo prices rose in the Area AI-adjacent “Dogpatch neighborhood” after blue-chip startup Y Combinator, previously led by OpenAI founder Sam Altman, relocated to the Dogpatch in 2023. The neighborhood is generally believed to be the next beneficiary of “the Area AI effect,” said The Real Deal’s Christopher Neely.
SIDEBAR 2
“The Dogpatch” Is the Next Big Thing
Where the blue-chip start-ups go, AI professionals and their families follow, typically with salaries starting around half a million dollars. Nowhere is this more evident than in the burgeoning interest in San Francisco’s “Dogpatch” neighborhood, a historic waterfront neighborhood that, until recently, boasted a number of dilapidated warehouses and 18th-century worker’s housing.
Now, however, companies like JPMorgan Chase are pouring millions of dollars into sites like the Dogpatch Power Station, where the company hopes to build a new, 342-unit building to help alleviate the housing shortage. Of those 342 apartments, 105 (just under one-third) are part of the firm’s American Dream Initiative and will remain part of the affordable housing initiative permanently.
Housing advocates warn that the larger issue is not the cost of housing but the lack of it, however. YIMBY Action Organizing director Brandon Powell warned, “If there is not enough housing to go around…people will be left without opportunities to stay in the city.”
SIDEBAR 3
AT A GLANCE
Analysis Courtesy of Dwellsy.com
