What Are the Current Construction Loan Rates in San Francisco?
San Francisco remains one of the most active and expensive construction markets in the United States, with commercial construction loan rates starting at approximately 6% for conventional programs and ranging up to 10.6% for hard money construction financing as of early 2026. The city's construction lending landscape reflects both the extraordinary demand driven by the AI technology boom and the unique challenges of building in a seismically active, heavily regulated urban environment.
Borrowers seeking construction loans in San Francisco should expect lenders to underwrite projects with particular scrutiny given the city's high per-square-foot costs, which range from $238 to over $1,200 depending on building type, size, and complexity. High-rise construction in San Francisco typically costs between $380 and $850 per square foot, while life science laboratory buildouts in the Bay Area can reach $675 to $1,200 per square foot. These elevated costs directly influence loan sizing, with lenders typically capping loan-to-cost ratios between 65% and 80% for ground-up projects.
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The median hard money construction loan in San Francisco carries a term of 22 months with an origination charge of 2.8 points, and the median loan amount sits around $298,750 for smaller projects. For larger institutional deals, construction loans routinely exceed $100 million. IQHQ recently secured a $275 million construction loan for a 334,300-square-foot life science building at 580 Dubuque Avenue, while Longfellow Real Estate Partners obtained a $310 million construction loan from CPDQ for a 315,000-square-foot life science campus in nearby Millbrae.
What Types of Construction Projects Are Being Financed in San Francisco?
San Francisco's construction pipeline has shifted dramatically since 2020, moving away from traditional office development toward life sciences, residential conversions, and mixed-use projects that align with the city's evolving economic landscape. Despite office vacancy rates hovering around 33.5%, the city recorded a 62.8% year-over-year increase in office leasing volume in the second quarter of 2025, the fastest growth of any U.S. city, driven almost entirely by artificial intelligence companies.
The AI boom has reshaped construction demand in San Francisco. Companies like OpenAI, Anthropic, and other major AI firms have collectively leased over 6 million square feet across the city, creating pockets of intense demand in neighborhoods like SoMa, the Financial District, and Mission Bay. Two major global developers proposed new skyscrapers in 2025: Houston-based Hines plans to construct the city's newest tallest building at 77 Beale Street, and New York-based Related Companies aims to build a 41-story tower at 530 Sansome Street.
Life sciences construction continues to anchor the city's development pipeline, particularly in the Mission Bay and Dogpatch neighborhoods. The sector demands highly specialized construction financing because laboratory and biotech facilities require complex mechanical systems, clean rooms, and specialized infrastructure that push costs well above standard commercial construction.
How Do San Francisco Construction Costs Compare to Other Major Markets?
San Francisco has consistently ranked among the most expensive construction markets globally, and 2026 is no exception. Commercial construction costs in the city exceed $534 per square foot in top-tier projects, with JLL's construction outlook predicting an additional 5% to 7% cost increase through the year. These elevated costs are driven by high union labor rates, stringent building codes, seismic requirements, and supply chain considerations unique to the Bay Area.
For borrowers, these costs directly affect construction loan sizing and feasibility. A mid-rise commercial building in San Francisco costs between $481 and $607 per square foot, while high-rise projects range from $557 to $730 per square foot at the high end. Life science and laboratory facilities represent the most expensive category, regularly exceeding $1,000 per square foot when accounting for specialized mechanical, electrical, and plumbing systems.
The city's seismic requirements add another layer of cost. San Francisco's building code mandates rigorous seismic engineering for all new construction, with specific requirements for soil conditions in neighborhoods like SoMa and Mission Bay, where liquefaction risk is elevated. Developers must budget for enhanced foundation systems, moment frames, and in some cases base isolation technology, all of which add 10% to 20% to structural costs compared to markets without seismic risk.
Lenders financing construction in San Francisco factor these elevated costs into their underwriting, often requiring larger equity contributions and more detailed construction budgets than in comparable projects in other major metros. Working with a lender experienced in San Francisco construction is essential to navigating these dynamics successfully.
What Are the Key Neighborhoods for New Construction in San Francisco?
San Francisco's construction activity is concentrated in several distinct neighborhoods, each with its own development dynamics, regulatory environment, and financing considerations. Understanding where lenders are most active helps borrowers identify the strongest opportunities for construction financing.
Mission Bay has emerged as the premier location for life sciences and biotech construction, anchored by the UCSF Medical Center campus and a growing cluster of research facilities. The neighborhood's master plan provides a relatively streamlined entitlement process compared to other parts of the city, making it attractive to both developers and their lenders. Construction loans for Mission Bay projects benefit from strong tenant demand and the area's established infrastructure.
SoMa continues to attract significant development interest, particularly from AI and technology companies seeking purpose-built or heavily customized office and laboratory space. The neighborhood's proximity to transit and its existing tech ecosystem make it a natural fit for companies that need large, modern floor plates. However, SoMa's varied soil conditions require careful geotechnical analysis and can increase foundation costs.
The Financial District and downtown core are increasingly the focus of adaptive reuse and conversion projects. Mayor Daniel Lurie formally established a Downtown Revitalization Financing District in February 2026 that will direct property tax revenue increases toward incentive payments for eligible conversion projects, with the potential to channel more than $1.2 billion into these efforts over the next 30 years. The city estimates approximately 50 downtown buildings could be suitable for conversion, potentially adding up to 7,000 new housing units.
What Are the Requirements for Construction Loan Approval in San Francisco?
Securing a construction loan in San Francisco requires meeting more stringent underwriting standards than in most other markets, reflecting the elevated risk profile of building in one of the world's most expensive cities. Lenders evaluate several critical factors when considering construction financing requests in the Bay Area.
Borrower experience is paramount. Most lenders require that sponsors have successfully completed at least two to three comparable projects, with particular weight given to San Francisco-specific experience. The city's unique permitting process, seismic requirements, and labor market dynamics mean that out-of-market developers face additional scrutiny and may need to partner with local operators to satisfy lender requirements.
Project entitlements and permits represent another critical checkpoint. San Francisco's planning and permitting process can take 12 to 36 months depending on the project's scope and neighborhood. Lenders typically require that all major discretionary approvals be in place before committing construction financing, though some bridge lenders will finance pre-entitled land with a clear path to permits.
The general contractor selection also plays a significant role in the underwriting process. Lenders want to see a licensed, bonded, and insured general contractor with a strong track record of completing projects on time and within budget in San Francisco. Given the city's tight labor market and union requirements, the contractor's relationship with local trade unions can materially affect project timelines and costs.
Financial requirements for construction loans in San Francisco typically include a minimum equity contribution of 20% to 35% of total project cost, a personal guarantee from the sponsor, 12 to 18 months of interest reserves, and completion guarantees. Lenders also require detailed construction budgets, project timelines, and evidence of takeout financing or a clear exit strategy.
How Does the Office-to-Residential Conversion Trend Affect Construction Financing?
San Francisco's aggressive push to convert vacant office buildings into residential housing has created a new and evolving category of construction financing. While the concept has generated enormous policy support, the actual execution has proven challenging, and lenders are approaching these projects with cautious optimism.
The city's Downtown Adaptive Reuse Program, combined with Measure C (approved by voters in March 2024), provides significant financial incentives for conversion projects. The program waives inclusionary housing requirements and impact fees for eligible adaptive reuse projects, and Measure C exempts the city's transfer tax on the first property transfer after conversion from commercial to residential use, limited to the first 5 million square feet of approved conversions before January 1, 2030.
Despite these incentives, office-to-residential conversions in San Francisco have been slow to materialize. The fundamental challenge is that conversion costs often equal or exceed the cost of new ground-up construction, particularly when older office buildings require complete mechanical system replacements, seismic upgrades, and floor plate reconfigurations to meet residential building codes. Lenders financing these projects must underwrite both the conversion cost risk and the uncertainty around residential absorption in formerly commercial neighborhoods.
The Humboldt Bank Building on Market Street represents the city's first major post-pandemic conversion project. Additional proposals are emerging, including a 70-unit conversion at 2300 Stockton Street near Fisherman's Wharf. As more projects move from planning to execution, construction lenders will develop more refined underwriting templates for this specialized product type.
For borrowers considering conversion projects, the key to securing financing is demonstrating that the total development cost, inclusive of acquisition and conversion, supports residential rents or sale prices that generate acceptable returns. Projects in neighborhoods with strong residential demand and proximity to transit tend to receive the most favorable lending terms.
What Financing Options Are Available for Different Construction Project Types?
San Francisco's diverse construction market supports a wide range of financing structures, each tailored to specific project types, timelines, and risk profiles. Understanding which financing vehicle best fits your project is critical to securing optimal terms and ensuring a successful development outcome.
Conventional construction loans from banks and credit unions offer the lowest rates, typically ranging from 6% to 8%, but come with the most stringent underwriting requirements. These lenders prefer experienced sponsors, fully entitled projects, and strong pre-leasing or pre-sale activity. Loan-to-cost ratios typically range from 65% to 75%, with terms of 18 to 36 months plus extension options.
Bridge-to-construction loans provide a hybrid solution for developers who need to acquire a site while entitlements are still in process. These programs allow borrowers to close quickly on an acquisition with a bridge loan that converts to a construction facility once permits are secured. Interest rates for these programs typically range from 8% to 12%, with the rate stepping down once the construction phase begins.
SBA 504 loans offer a compelling option for owner-occupants building or renovating commercial properties in San Francisco. The program provides up to 90% financing with fixed rates on the SBA portion, making it particularly attractive for small businesses constructing their own facilities. The program's below-market rates help offset San Francisco's elevated construction costs.
Hard money construction loans serve borrowers who need speed or cannot meet conventional lending requirements. These asset-based loans can close in as little as two to three weeks, with loan-to-cost ratios up to 80% and terms of 12 to 24 months. Interest rates range from 9% to 13%, with origination fees of 2 to 4 points.
For more information on construction financing programs, visit our construction loan guide or explore our commercial bridge loan options. You can also use our commercial bridge loan calculator to estimate your project costs.
What Seismic and Regulatory Requirements Affect Construction Lending in San Francisco?
San Francisco's seismic requirements represent one of the most significant factors differentiating construction lending in the city from other major markets. Every new construction project and major renovation must comply with the city's rigorous earthquake safety standards, and lenders incorporate these requirements into their risk assessment and loan structuring.
The city's building code requires that all new construction meet or exceed current seismic design standards, with enhanced requirements for buildings in liquefaction zones, near active fault lines, or above certain height thresholds. The upcoming Concrete Building Safety Program (CBSP) will add new requirements for the retrofit of older non-ductile concrete buildings constructed before July 2000 with gross floor areas exceeding 3,000 square feet.
For construction loans, seismic compliance affects both project costs and timelines. Lenders require peer-reviewed structural engineering reports, soil condition analyses, and detailed seismic design documentation as part of their underwriting package. Projects in high-risk zones like SoMa, the Embarcadero, and parts of Mission Bay may require additional engineering measures such as deep pile foundations, soil improvement, or base isolation systems.
Beyond seismic requirements, San Francisco's construction regulatory environment includes some of the most demanding building codes in the nation. Projects must comply with California's Title 24 energy standards, the city's Green Building Code, accessibility requirements, and neighborhood-specific design guidelines. These requirements add both cost and time to the construction process, and lenders expect detailed compliance plans as part of their loan review.
San Francisco also requires prevailing wage compliance for many construction projects, particularly those receiving public incentives or located in specific development zones. This requirement can increase labor costs by 15% to 30% compared to open-shop markets, directly affecting construction budgets and loan sizing.
Frequently Asked Questions About Construction Loans in San Francisco
What is the minimum down payment for a construction loan in San Francisco?
Most lenders require a minimum equity contribution of 20% to 35% of total project cost for construction loans in San Francisco. The exact requirement depends on the project type, borrower experience, and lender program. Owner-occupied projects financed through SBA 504 loans may qualify for as little as 10% equity, while speculative development projects typically require 30% to 35%. Higher equity requirements are common for first-time developers or projects in neighborhoods with limited comparable sales data.
How long does it take to get a construction loan approved in San Francisco?
Construction loan approval timelines in San Francisco typically range from 30 to 90 days for conventional lenders, depending on project complexity and the completeness of the application package. Hard money and private construction lenders can approve and fund loans in as little as 10 to 21 days. The timeline often extends if the project requires additional environmental review, specialized engineering reports, or if the borrower needs to obtain outstanding permits. Having a complete application with all required documentation, including plans, permits, budget, and contractor agreements, can significantly accelerate the process.
Can I get a construction loan for an office-to-residential conversion in San Francisco?
Yes, several lenders now offer construction financing specifically for office-to-residential conversion projects in San Francisco. The city's Downtown Adaptive Reuse Program and related incentives have increased lender appetite for these projects. However, underwriting is more complex than for ground-up construction because lenders must evaluate both the existing building conditions and the conversion plan. Borrowers should expect lenders to require detailed feasibility studies, structural assessments, and evidence of residential market demand in the project's location. Visit our commercial refinance guide for more on repositioning existing properties.
What are the typical interest rates for construction loans in San Francisco?
Construction loan interest rates in San Francisco vary significantly based on the loan type and borrower profile. Conventional bank construction loans range from 6% to 8%, typically priced at a spread over the prime rate or SOFR. SBA construction loans offer fixed rates on the CDC portion, often in the 5% to 6% range. Bridge and mezzanine construction loans range from 8% to 12%, while hard money construction loans typically carry rates of 9% to 13% plus origination fees of 2 to 4 points. Interest is usually charged only on the drawn balance, which reduces effective borrowing costs during the early phases of construction.
Do I need a San Francisco-based contractor to qualify for a construction loan?
While lenders do not always require a San Francisco-based general contractor, they strongly prefer contractors with demonstrated experience completing projects in the city. San Francisco's union labor requirements, seismic codes, and permitting process create unique challenges that out-of-market contractors may struggle to navigate efficiently. Lenders will evaluate the contractor's license status, bonding capacity, insurance coverage, and track record of on-time, on-budget project completion. Working with a contractor who has strong relationships with local subcontractors and trade unions can improve both the lending terms and the project outcome.
How do I calculate the total cost of a construction project in San Francisco?
To estimate total construction costs in San Francisco, start with the building type and multiply the gross square footage by the appropriate per-square-foot cost range: $238 to $400 for low-rise commercial, $380 to $850 for high-rise, and $675 to $1,200 for life science and laboratory space. Add soft costs (architectural, engineering, permits, and inspections) at 15% to 25% of hard costs, plus a contingency of 10% to 15%. Include land or acquisition cost, financing costs (interest reserves, origination fees), and any required seismic or environmental remediation expenses. Use our commercial mortgage calculator to model different financing scenarios and determine your total capital requirement.
Ready to discuss your San Francisco construction project? Contact our team for a free consultation, or explore commercial loans in San Francisco for an overview of all available financing options in the city.