Silicon Valley growth spurs huge office, R&D building boom

A huge wave of commercial property construction is underway in the Bay Area, and Silicon Valley’s economic boom is fueling the growth, according to a report released Wednesday.

Construction of new buildings for offices, research and development and industrial uses is galloping ahead at a “feverish” pace, a report stated.

“This is a construction boom like no other,” said Russell Hancock, president of San Jose-based Joint Venture Silicon Valley, a private-public organization. “There is a lot of confidence in the Silicon Valley economy. People who are developing buildings are quite sure that they are going to get leased up. And they are getting leased up.”

Read more from The Mercury News

 

 

Builders, Developers Focus On Ways To Save Costs, Build More Housing Units In Oakland, Bay Area

With rising construction costs, a costly entitlement process and labor shortages, Bay Area developers are looking into new ways to build housing more cost-effectively.

Developers are utilizing density bonuses, adding more efficiencies into construction, exploring modular units and prefab and experimenting with new techniques to keep costs down and get more projects off the ground.

Even though there are 17,000 units at different planning stages in Oakland, many of these units rent in the $3K to $4K range, which is not affordable for a majority of people in the Bay Area, oWow founder Danny Haber said during Bisnow’s Alameda County Multifamily and Mixed-Use event in Oakland.

His company’s focus has been on creating macro-units with efficient design that lead to three- and four-bedroom units that are more cost-effective to build and end up being 50% more affordable than their market-rate counterparts.

“The biggest amenity today … is affordable housing and access to jobs and opportunities to work,” Haber said.

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How to Find Continued Value in Apartment Acquisitions

With concessions ticking up and rent growth slowing, is it time to question or finetune allocation levels and strategies in multifamily investing?

The stability, durability and continued capital flows into multifamily investing permeate today’s headlines, with industry pundits believing apartments to be the most popular product type with real estate investors in 2018, second only to industrial. Mixed signals abound among varying markets, and it’s important to dissect and triangulate the real data as the analytics don’t always tell the full story.

A first quarter report from Fannie Mae cited:

  • Positive, but slowing net absorption in 2018 compared with 2017 (CoStar)
  • Surging apartment development, peaking at over 440,000 units nationwide and up 16 percent from 2017 (Dodge Data & Analytics)
  • Rising nationwide vacancy rate predicted to approach recent historical average of six percent by year-end (Fannie Mae)

With concessions ticking up and rent growth slowing, is it time to question or finetune allocation levels and strategies in multifamily investing? Two principal factors are worthy of consideration here: geography and investment horizon.

Nationally, development is projected to keep pace with net absorption, as Fannie Mae projects net rental demand of 380,000 to 460,000 units in 2018. However, parsing geographies more discerningly reveals that new multifamily construction has been heavily concentrated in America’s largest cities, where pockets of oversupply are projected. New York, Boston, Washington, D.C., Chicago, Los Angeles and San Francisco present some of the highest unit construction per capita in the country, yet are all projected by Moody’s Analytics to experience job growth in 2018 that lags the national forecast of 1.5 percent.

All markets do not bear these metrics though, especially in select secondary markets where Fannie Mae reports the ratio of projected population and employment growth to rising apartment inventory is more favorable. Cities such as Houston, Dallas, Austin, Texas, Salt Lake City and Portland, Ore., even while seeing brisk construction, are forecast to increase job growth between two to three percent amid continued rental escalation. Two markets worth investigating include Phoenix, where projected 2.6 percent employment growth forecasts the demand for 10,000 units against projected 2018 delivery of 8,000 units, and Las Vegas, where projected 2018 absorption is double the number of units under construction.

Development nationwide should peak in 2018, as planned units in comparison to those under construction taper off, even in cities with the most active pipelines. This suggests that investors with a longer hold horizon may see their patience rewarded when new supply is absorbed and vacancy rates level off. Several long-term demographic trends also bode well for multifamily absorption and rental rates:

  • Householders continue to delay marriage and childbirth, thus tending to remain in apartments
  • Population growth in many areas, particularly in the Southwest, is being fueled by immigrants who tend to be renters
  • Real household income growth is occurring only in the upper 20 percent of earners, rendering home ownership less affordable for many
  • Student loan debt, which doubled as a percentage of GDP between 2006 and 2012, stymies home ownership for younger households
  • Conversely, the 65+ baby boomer generation, America’s most rapidly growing domestic cohort, is demanding more rental housing as they age out of owned homes and reevaluate their investment and retirement options

In our view, investors who choose their geographies wisely and take a long-game approach should see their properly selected multifamily investments buoyed by these market and demographic trends, while enjoying relatively predictable cash flows in the interim.

Read more from National Real Estate Investor

 

Development without gentrification? Oakland’s Fruitvale is the model, report says

Oakland’s Fruitvale transit village has been a boon to the surrounding community without gentrification

The cluster of shops, community service organizations and apartments at the Fruitvale BART station may not seem all that different from other commercial plazas, but to some economists and urban planners, it’s the grand prize of development — at least, for now.

Researchers from UCLA’s Latino Policy and Politics Initiative say the transit village has been a boon to the surrounding neighborhood without resulting in gentrification. As many low-income and working class residents across the state are forced to leave urban areas due to rising rents and home prices, the UCLA researchers said Oakland’s Fruitvale neighborhood has held onto its existing residents, along with its signature Mexican-American culture.

“It’s the holy grail of urban planning,” said Alexander Quinn, an economist with Hatch, who reviewed the study’s findings, “to say we improved the place and the people who live there are better off.”

But long-time residents, academics and elected officials question whether Oakland’s Mexican-American mecca can continue to withstand the pressure of the region’s booming economy.  And, to them, the tide may already be turning.

Read more from East Bay Times

 

 

Exclusive: Chinese developer brings on local development muscle as it digs into Santa Clara megaproject

A Chinese company has brought on local development help as it studies the feasibility of building a 10.5 million-square-foot mixed-use development in Santa Clara — a project that local insiders say could get even bigger.

The Chinese developer working on getting approvals for a 10.5 million-square-foot-development on a former Yahoo site in Santa Clara appears to have forged a formal relationship with a local developer to help with the process.

Harmonie Park Development last week announced in a tweet it was “excited to be named development advisor to Kylli.”

Kylli Inc., an American subsidiary of Shenzhen, China-based pharmaceuticals and real estate company Genzon, earlier this year got unanimous approval from Santa Clara City Council members to study amending the city’s general plan to grow the allowed development for the 48.6-acre site roughly at 3005 Democracy Way more than three-fold.

One local land use consultant now says the project could get even bigger, according to conversations he’s had with people purporting to be involved with the project.

Read more from Silicon Valley Business Journal

 

 

San Francisco evictions in decline, less than two-thirds of state average

Only half of eviction notices lead to actual ouster, according to Princeton database

San Francisco landlords evict tenants at less than two-thirds the rate of the average California city.

That’s the conclusion from Princeton University’s recently launched Eviction Lab, which compiles data from 48 states and Washington DC to get a bird’s-eye view of what eviction in the U.S. looks like. In 2016, Princeton recorded roughly 2.3 million evictions coast to coast, around one per every 140 citizens.

Compared to that, California’s rate of one eviction per 933 residents—41,178 evictions total in 2016—looks almost rosy; however, it’s not wise to use those kinds of terms when talking about tens of thousands of people losing their homes.

And in San Francisco the news is even more potentially comforting for renters. A few takeaways from the data:

  • Eviction Lab reports 593 SF evictions the same year, one per every 1,417 people (Eviction Lab uses an estimated SF population of 841,000 for 2016, which is actually on the low side), a rate of about 63.5 percent of the state average.
  • The database also records some 1,176 eviction filings the same year, meaning that the success rate of attempted evictions in SF was just over 50 percent. In the rest of the state it was more than 87 percent.
  • Overall, California had 112.51 evictions per day in 2016. SF had just 1.62, or just less than 1.44 percent of the state eviction rate.
  • Although Eviction Lab records a median rent in SF more than $300 pricier than the state average, the city’s median income also outstripped California average by over $19,000.

Before uncorking the champagne, note that there are some discrepancies between Princeton’s and San Francisco’s data sets.

Read more from Curbed SF

 

 

 

California Senate stalls transit-housing bill

Citing not enough affordable housing, vote against leaves Senator Scott Wiener’s signature bill in limbo

After months of public wrangling and amendment, San Francisco’s State Senator Scott Wiener finally brought his signature transit-housing bill SB 827 before the Senate Transportation and Housing Committee in Sacramento Tuesday, where it stalled on a 6-4 vote that leaves it in limbo.

SB 827 would have radically changed how California cities zone for height and density by making it illegal to place height limits below four to five stories (depending on the locale) along major transit routes.

Thanks to San Francisco’s extensive bus network, this would have applied to virtually every parcel in the city. But even cities with far less skin in the game, like Lafayette and Berkeley, complained that the bill redirected too much control from local municipalities to the state.

Calling local control “important but not biblical,” Wiener again labored on Tuesday to frame the bill as a necessary step given the scope of the crisis.

Read more from Curbed SF

 

 

 

Huge investors chase San Francisco’s $300 million Ferry Building

The 1889 building is drawing interest from some of the country’s biggest landlords.

Some of the country’s biggest real estate investors want to buy control of San Francisco’s iconic Ferry Building in a deal that could exceed $300 million.

Kilroy Realty Corp, Hudson Pacific Properties In.c, Invesco Plc, and Thor Equities, are all competing to acquire the building, according to five, sources. A buyer could be selected within a month, said the sources.

The pending deal is another sign of San Francisco’s enduring appeal for major office investors as rents have jumped and little supply is being added.

The 1889 Ferry Building at the eastern terminus of Market Street includes 175,000 square feet of office space and 65, 000 square feet of retail in a popular ground-floor marketplace. The building and its weekly farmer’s markets draw tens of thousands of visitors a week. Its office space with waterfront views also commands some of the highest rents in the city, up to $100 per square feet.

Read more from San Francisco Business Times 

 

 

Nine Things To Keep In Mind About Blockchain In Real Estate

Blockchain is the next frontier of the real estate market, making inroads at a fast clip.

The use of the technology will make it possible to have transparent transactions that sellers and buyers will benefit from. From real-time ledgers to full-on shared databases and processes, blockchain throws the doors wide open with possibilities in real estate. However, does it come at a cost?

Some agents think it might, while others are embracing it with abandon. Yet, there is much to learn and consider before adopting blockchain into your business processes.

Nine members of Forbes Real Estate Council share the thing that everyone in their profession needs to know in order to safely and efficiently begin adopting blockchain or the tools it enables.

Read more from Forbes

 

 

San Francisco’s homeless crisis is driving tourists away

San Francisco’s hotels are facing a serious problem.

The city’s idyllic image of the Golden Gate bridge and grandiose views of the bay are being replaced by concerns about needles and feces littering the streets, homeless citizens sleeping on sidewalks or in Bay Area Rapid Transit stations and aggression toward visitors by people with untreated mental illness. Visitors are noticing and rethinking booking events and vacations at hotels around the city.

San Francisco’s homeless population was down by 0.5% in 2017 compared to 2015, but is about 17% higher compared to 2013, according to SFist. While homelessness is nothing new for the city, hoteliers and local business say street conditions have worsened.

Within 153 blocks in downtown, there were over 300 piles of feces, 100 drug needles and trash on every block, a recent report by NBCBayArea revealed. Complaints of poor street conditions to 311 have skyrocketed in recent years. In 2016, 311, a city agency where visitors and residents can report issues or seek information about the city, received 44,000 complaints of encampments, human waste and needles, up from 6,300 complaints in 2011, according to the San Francisco Chronicle.

“[Visitors] are noticing it and hearing about it and saying, ‘well, why would I bring my conference here?’” Hotel Council of San Francisco Executive Director Kevin Carroll said.

Visitors often have rave reviews for the local restaurants and hotel service, but say they will not come back or will not bring their families here, he said.

San Francisco is not the only major West Coast city dealing with issues of homelessness and street conditions impacting tourism and hospitality. Anaheim, home to Disneyland with its spotless, litter-free Main Street, U.S.A., has the stark contrast of homeless people who live just outside the park. The city has been looking into ways to help its homeless population, such as providing emergency shelter and employment opportunities. Honolulu also took action in recent years on cleaning up the streets, including around its popular Waikiki area.

Read more from Bisnow