Yes, SF is a perfect example where demand so wildly outstrips supply that the dominating driver of cost is space. Whether it is nice space or a total dump is only a small percentage of what dictates the over all price.

Look at it this way, say a small apartment has 12 Square feet of counter space in the kitchen laminate counters cost $25 per square foot and granite costs $50. the relative cost difference between luxury and cheapo now is almost nothing once amortized and compared to the total rent.