Question 1

What property types actually get permanent debt in San Francisco right now?

Accepted Answer

Health care, government-adjacent, and visitor-economy assets, not office. In the year to July 2026, metro government payroll grew 0.8% and leisure and hospitality payroll grew 3.5%, while the metro's information sector fell 3.3%. Those payroll trends are the closest sourced signal to where stabilized income sits in this market, and they point away from office as the property type carrying long-term agency, insurance, or wholesale debt here. If the buyer is a small business purchasing to occupy rather than institutional capital chasing a stabilized yield, see San Francisco SBA loans instead.

Question 2

How does San Francisco's transfer tax affect a long-term hold I plan to sell someday?

Accepted Answer

It has to be underwritten into your exit, not treated as a closing-day line item. San Francisco's transfer tax is tiered on the entire sale price, not just the amount above each threshold, so a property that sells at $10,000,000 owes 5.50% of the whole price, $550,000, while one that sells at $9,999,999 owes $225,000, a $325,000 jump for crossing that line. At $25,000,000 and above the rate rises to 6.00%. A permanent-debt hold plan for a large San Francisco asset should model where those cliffs fall relative to the projected exit price.

Question 3

Can I sidestep the exit tax by holding the property in an entity or a long ground lease?

Accepted Answer

No. San Francisco's transfer tax reaches transfers involving legal entities that own San Francisco real property and is due when those entities change control, and it applies separately to leaseholds of 35 years or more on the same tiered schedule. A structure built to move an asset without recording a deed, an entity-level sale or a long ground lease, is still a taxable transfer here. What counts as a change of control is fact-specific, so confirm the mechanics with your attorney before you rely on a particular structure.

Question 4

Why bridge to permanent instead of getting permanent debt at acquisition, especially for office?

Accepted Answer

Because San Francisco office is still repricing off a vacancy bottom, not a stabilized income stream. Office vacancy ran 29.2% in the second quarter of 2026, with asking rents at $72.96 a square foot, full-service gross, against a pre-pandemic benchmark of 4.70% vacancy in the second quarter of 2019. An asset in that position does not yet have the stabilized cash flow permanent lenders price to. Our path for a deal like that is to bridge it through lease-up or repositioning, then refinance into agency, insurance, or wholesale permanent debt once the income supports it, rather than forcing permanent terms onto an asset that is not there yet.

Question 5

How should I underwrite the property tax line on a San Francisco asset going into permanent debt?

Accepted Answer

At the price you are paying, not the seller's assessed value. Every California purchase resets the assessed value to the price paid, so a long-held seller's tax bill understates what you will owe in year one, sometimes by a large multiple. Model the annual tax at the purchase price times the applicable rate before you lock in the permanent debt's coverage ratios, not off the trailing tax expense in the seller's operating statement.

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