SAN FRANCISCO-A research report that GlobeSt.com exclusively obtained from Marcus & Millichap Real Estate Investment Services shows that for the San Francisco apartment market, renovating existing properties is key to outsized returns. According to the report, the apartment market here is arguably the strongest in the nation, and the impending construction boom will only have a minor impact on operations.

Job growth in the tech industry remains the key driver for occupancy and rent gains, and owners will likely have a strong negotiating position into next year, says the report. However, some early indications are emerging that rent growth will slow to a sustainable pace during the next several quarters, the report says.

Jeffrey Mishkin, first vice president and regional manager of the San Francisco office, notes that “class A vacancy is leveling off, while lower-tier vacancy tightens. As rents in the top-tier have climbed, many tenants are choosing to move down the quality scale rather than spending more of their income on housing,” he says. “Although new demand has been sufficient to offset these losses, new supply could tip the supply-demand bal