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How would San Francisco’s proposed fees on empty storefronts affect retail and mixed-use properties?

This week the San Francisco Board of Supervisors will vote on whether to require owners of vacant storefronts unoccupied for more than 30 days to register their properties and pay an annual fee. This is one of the proposals they are considering to get a better idea of and start to remedy the glut of unused storefront space around the city.

Read more on Curbed San Francisco

Developers claim co-living suites earn more per square foot than regular apartment rentals

Co-living developers in New York and Washington, D.C. report strong demand from renters.

Hundreds of co-living suites are renting quickly at ALTA LIC, a new high-rise apartment building in Long Island City, Queens.

“We are now about four months ahead of our expected pace,” says Christopher Bledsoe, co-founder and CEO of Ollie, the company managing the ALTA’s co-living apartments.

Companies like Ollie are proving that there is plenty of renter demand for co-living arrangements. The co-living spaces at ALTA are now earning more dollars per sq. ft. than the new conventional apartments in the same building. Other operators of co-living properties also report strong results at their projects.

“We can only speak to performance of our OSLO properties… and they have been exceptional,” says Martin Ditto, CEO of Ditto, a company that operates three fully-occupied co-living properties in the Washington, D.C. metro area, and is now planning to open a fourth.

Strong rents prove demand for co-living

“Co-living” is a living arrangement in which the residents share some aspects of their living spaces with each other. It’s not as radical as it sounds—for Ollie and Ditto’s OLSO brand, co-living typically takes the form of multi-bedroom apartments shared by roommates. For years, the student housing industry has also been building suites that students share as roommates.

“Our product type is a natural evolution of the student housing model,” says Ollie’s Bledsoe.

ALTA LIC opened in May 2018 with 466 apartments. Of those, Ollie is operating 169 as furnished co-living suites with a total of 422 bedrooms. According to Bledsoe, it’s the largest purpose-built co-living property in the United States.

After less than a year in operation, 73 percent of these units are occupied, with renters paying from $1,260 to about $2,200 per month for a bedroom. The higher priced units may be larger, have better view, private entrances off the hallway or their own, un-shared bathrooms.

The cost of a bedroom also includes wireless Internet service and weekly housekeeping services, including bed linen, towels and toilet paper, along with shampoo and hand soap from Malin & Goetz. “It is the convenience of hotel living,” says Bledsoe.

The units are sized for efficiency and come furnished with custom furniture designed by Ollie to make the best use of small spaces. “For us a 535-square-foot studio is a two-bedroom micro-suit… a 750-square-foot one or two-bedroom is a three-bedroom suite,” says Bledsoe.

These co-living suites earn an average of 44 percent more income in rent per sq. ft. than the more conventional 297 luxury apartments at the 43-story tower, according to Bledsoe. The net operating income from these units is also 30 percent higher per sq. ft., even with the extra cost of co-living amenities like the housekeeping service.

 

Read more at National Real Estate Investor

Multifamily owners jump in the short-term rental game

When Harold Wu moved from Toronto to Baltimore for a new job, the first thing on his to-do list was to get a place to live.

As he embarked on his apartment search, the T Rowe Price senior vice president of procurement decided to book a hotel in Baltimore for a week in September.

“I looked at the usual suspects: Hilton, Marriott, Brookshire Suites, Residence Inn and so on. Then I stumbled upon WhyHotel on the internet.”

WhyHotel operates temporary hotels within multifamily buildings during a lease-up phase of a new apartment building.

Wu liked the idea of having a place with a full kitchen for the week as a home base. He never thought he’d actually end up living in that very apartment complex.

His weeklong experience at 225 Calvert ended up being the ultimate try-before-you-buy. As he looked around at other apartments — he shopped 36 in total — he found himself appreciating his temporary digs more and more. He liked the amenities, the closet space, the lockers for packages and the security. The ultimate test was of the soundproofing, and it passed.

“I wanted to see if this was a cheap renovation. You don’t hear your neighbor.”

The short-term stay aspect of the property made him nervous at first.

“Frankly, I was concerned that they had a hotel on multiple floors. I didn’t want to have a transient population walking around in my building if I were living there.”

But he has embraced it. He ended up signing a lease for a one-bedroom instead of two — he no longer has to host guests, as he has a hotel directly in his building now.

Other than seeing people with luggage around the elevator banks, Wu said he barely notices his short-term neighbors. Other apartment dwellers haven’t reported the same experiences, citing disturbances and crowded amenity spaces with the temporary guests.

Short-term rentals may not be widely accepted as a viable long-term option for a multifamily owner. Subleasing is generally not accepted, and short-term visitors can be disruptive to residents and create potential liability issues, market experts say.

 

Read more at Bisnow

 

 

With Square move on horizon, fintechs discover Oakland

Square’s expansion into Uptown Station underscores what fintech entrepreneurs have been saying for some time: Oakland is hot and only getting hotter.

Square’s new lease taking all of Oakland’s Uptown Station signals the growing popularity of the East Bay’s largest city for fintechs and other startups.

Fintech entrepreneurs say Square moving into the city in such a big way — the payments company plans to start moving in about 2,000 employees beginning later this year — means a lot more energy and talent will be drawn into Oakland.

Square’s move represents a tripling of Oakland’s fintech workforce, which the city estimates to be just under 1,000 people.

“We have a small but growing tech sector in Oakland,” said Marisa Raya, economic development specialist for the city of Oakland.

 

 

Read more at San Francisco Business Times

 

Landlord-tenant relationships are changing, thanks to cryptocurrencies, Airbnb, and more

New challenges facing landlords in 2019.

This could be a great time to be a landlord.

The real-estate market still only has enough supply for half the population. We’re still seeing high divorce rates, so people need more places to live. And households are still being created faster than the housing supply. All that combined means higher rents and that trend looks likely to continue for a long time.

In fact, according to the Mortgage Bankers Association, rising rates on 30-year mortgages — now firmly above 5% and on track to reach 5.8% by the end of the year — will help to drive rents higher in the coming year as more people get priced out of home buying by these higher interest rates. According to an analysis by Zillow, rent growth will pick up in 2019 as the Federal Reserve continues to raise rates.

For landlords, this is all very good news. And, given the evolution that the real-estate market has gone through over the last couple of decades — expanding to include short-term rentals, absentee owners, do-it-yourself property managers and more — the future looks bright for all involved.

Read more at MarketWatch 

 

WeWork takes new downtown San Jose site amid expansion

WeWork is leasing a new downtown San Jose location, a clear indication of an ongoing expansion by the co-working titan in the core area of the Bay Area’s largest city.

The newest WeWork location is at 152 N. Third St., a downtown San Jose office building owned by a group led by Gary Dillabough, a realty investor who is partnering with WeWork on the Bank of Italy office tower project a few blocks away.

The interest from WeWork in the North Third Street building appears to point to a rising focus on downtown San Jose, spurred by potential major developments in the area by tech titans such as Google and Adobe Systems.

WeWork agreed to lease 75,000 square feet at 152 N. Third St., according to commercial realty experts and information from sources with knowledge about the WeWork plans at that office building. The WeWork operation on North Third Street also shows up on the company’s website as a “just announced” location.

“It’s very encouraging that WeWork is getting more interested in downtown San Jose,” said Mark Ritchie, president of Ritchie Commercial, a realty firm.

In addition, WeWork has taken space in one of the Riverpark Towers office high-rises at 333 W. San Carlos St. and the tower at 75 E. Santa Clara St.

“WeWork is now into four buildings in downtown San Jose,” Ritchie said. “152 N. Third St. should function very well as a co-working building.”

 

 

Read more at The Mercury News

 

 

The shopping mall’s savior is starting to eat itself

Restaurants, one of the supposed saviors of regional malls, have been hurt in the past 12 months by too much expansion and a slowdown in consumer spending.

Stephen Wall’s restaurant chain Pho is the kind of tenant that mall landlords would love to attract. The Vietnamese menu is right on trend, the business is expanding and, even better, it has a track record of success in shopping centers.

Yet he thinks that even restaurants like his won’t be the savior of malls suffering from the rise of internet retailing and mobile phone addiction.

As competition from the likes of Amazon.com Inc. and Asos Plc intensified, British mall owners looked to food as a way to stay relevant. People would come to the restaurants to eat, buy some clothes in the shops while there, and the extra spending would allow the landlord to boost the rents. A simple, virtuous circle.

Instead, food and beverage operators have been hurt over the past 12 months by a combination of rapid expansion and a consumer-spending slowdown. An influx of private-equity investment into restaurants led some chains to open too many outlets that aren’t breaking even. Popular names like Gourmet Burger Kitchen, pasta place Carluccio’s and the Jamie Oliver chain — often found at big malls like Westfield and Bluewater around London or Manchester’s Trafford Centre — have been among those suffering. Nationwide, the number of restaurants going insolvent rose 24 percent last year, compared with 2017.

 

 

Read more on National Real Estate Investor

 

 

 

Square takes over enormous Oakland building

Uptown Station, once meant to be Uber’s Oakland HQ, nets a new tech tenant.

Not too long ago, the circa 1929 Beaux-Arts building in Oakland now known as Uptown Station was meant to be the East Bay home of Uber, which had ambitious plans for the historic and recently refurbished locale.

But Uber sold the building almost exactly a year ago, netting $175 million from Oakland-based investment firm CIM Group but leaving the future of the sometimes neglected unofficial landmark up in the air.

On Thursday, CIM and Square announced that the SF-based payment app company owned by Twitter CEO (and Benioff antagonist) Jack Dorsey will lease much of the building, completing the locale’s long transition into an East Bay tech hub.

“Square has signed a lease for the entire office space in the iconic Uptown Station building,” according to a Thursday press release from both companies, a deal covering more than 350,000 square feet.

The building at 1955 Broadway first opened as an HC Capwell department store in the ‘20s, at the time apparently a very big ticket for Oakland as thousands showed up to see the mayor overturn the first shovelful of dirt on the future shopping hub.

Eventually, the building transitioned into being a Sears store instead, and for many years now has laid mostly dormant.

Developer Lane Partners spearheaded efforts to turn the disused retail Mecca into a new mixed-use office building before selling to Uber in 2016.

Square won’t actually move in until the end of 2019, possibly because CIM Group is still overseeing work that’s being done on the nearly century-old building.

“Oakland is committed to attracting businesses whose values align with our community. […] I believe Square can be that company,” Oakland Mayor Libby Schaaf said Thursday.

 

 

Read more on Curbed SF

 

 

As another San Francisco office tenant decamps for Oakland, will Salesforce take its space?

Another office tenant plans to move to Oakland from San Francisco, freeing up some space that Salesforce is reportedly looking to lease.

The exodus of office tenants fleeing San Francisco for Oakland continues. The latest example is the California State Department of Insurance, which plants to vacate its space in 45 Fremont St. and recently signed a lease for 47,000 square feet on three floors in 1901 Harrison St. in Oakland.

Another tenant, Blue Shield of California, inked a deal back in 2016 to leave the same building for space in a new office tower, 601 City Center in Oakland. The insurance company plans to occupy 225,000 square feet in the building in mid-2019.

The moves illustrate a broader trend of traditional office tenants leaving San Francisco while the tech industry gobbles up available spaces.

Cloud software maker Salesforce Inc. is rumored to be close to taking the 282,000 square feet in 45 Fremont, owned by Shorenstein Properties and Blackstone Group. The building is next door to 350 Mission St., known as Salesforce East, that is part of Salesforce’s urban campus in SoMa.

 

 

Read more on San Francisco Business Times

 

 

New SF hotels, WeWork-backed waterfront school among ideas for historic piers

Developer Simon Snellgrove has an idea: A new 65-room boutique hotel just south of the Ferry Building.

The problem: Hotels are illegal on Port of San Francisco land unless voters authorize them.

Snellgrove’s concept is one of 52 responses received by the port to revitalize 13 historic waterfront piers that dot the city’s scenic Embarcadero.

For the past three years, the port has sought public uses to bring new life for the piers, some of which were built over a century ago. The projects have big financial hurdles, requiring millions of dollars in renovations to withstand future earthquakes and sea level rise. But previous projects like the renovated Ferry Building and AT&T Park are a testament to the public’s love — and the lucrative business — of waterfront development.

The port received a diverse mix of ideas, including basketball and tennis courts, art galleries, an Italian Innovation Hub, and an International House of Prayer of Children. Boston Properties, the city’s biggest office owner and majority owner of Salesforce Tower, said it was open to operating nonprofit, maker and research space.

 

 

Read more on SFGate