Big Tech Throwing Big Money at Housing Crisis

It seems every week we’re hearing about another BILLION dollars or more coming into the Bay Area housing market.

Most recently it’s Apple with $2.5 billion, one-upping both Facebook and Google’s earlier $1 billion each. Amazon and Microsoft are doing the same in Seattle.

Why is this a “trend” though? Why is there a tech “arms race” on this issue? The answer is one of the simplest Things You Learned in Kindergarten lessons:
 You Break It, You Buy It. 

Imagine the span of about 18 months from late 2007 to early 2009: 1) Apple introduces the iPhone; 2) Google releases the Chrome browser; and 3) Facebook hit critical mass, shifting from a little campus thing into a real social network and brand platform.

That’s when the world changed. Since then 500,000 tech jobs have been created. Every one tech job yields five non-tech jobs. And yet, only 50,000 new homes have been built. A recent McKinsey report estimates that 3.5 million new homes are needed by 2025 to close the gap.

So tech brings in thousands of bodies, throws tons of money at them, and demand+prices skyrocket. Now they’re throwing more money at the problem they helped create.

But money alone isn’t enough, according to experts who say the answer is “a combination of relaxed suburban zoning and permit regulations from local governments, aggressive home building over the next decade, public transportation alternatives, and a wider array of housing options beside single-family homes.”

And this is why we need to talk to you. 

The answer is taller multifamily properties, preferably near transit centers. So what are you sitting on? Ask yourself: 

  • Do you have a property near a BART or CalTrain station? Or major bus line?
  • If you could get zoning changed, could your current property be developed into housing? 
  • If you could get height limits changed, do you have a property that could be a higher-rise multifamily site? 
  • Could you get access to any of the $4.5 billion earmarked by tech to improve housing? 

Governments are ready to adapt, and you might have an ideal situation for a developer able to navigate City Hall. Contact us, and let’s look at all the commercial real estate investment opportunities that you might benefit from as the rush to build housing continues. 

Yeah but what does a private Walgreen’s mean to *property* investors? 

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Word is out this week that Walgreen’s is exploring the possibility of going private. The now-public drugstore chain is working with investment bank Evercore Partners to gauge interest from large private equity firms in footing the roughly $55 billion bill. That would make it the largest leveraged buyout ever.

Walgreen’s has a history of valuing its business privacy — particularly with regards to its prescription sales numbers — and for being at odds with Wall Street scrutiny. The market has battered them this year, pushing stock down 28% in the past 12 months. This move is thought to be prompted by management’s vision to be more autonomous with their strategies and partnerships.

Last week in this newsletter we pondered some numbers around the “retail apocolypse,” and discovered that the Amazon Effect isn’t so much killing brick-n-mortar stores, it’s just reshaping the live retail offering. Walgreen’s is a prime example of this, and while they’ve taken an  Amazon hit, they’re re-aligning in a way that is taking their physical stores in a positive direction.

Walgreen’s has pilot projects and tests with companies like the grocer Kroger, Microsoft, and primary care providers like Humana’s Partners in Primary Care and VillageMD, a developer of primary care clinics. This makes them less reliant on “Amazonable” products like shampoo, while creating revenue from real-time, location-centric services.

And they’ve announced plans to close 200 stores in this streamlining effort, which can sound ominous to property owners leasing to the chain. But these stores are all clearly declining and unprofitable locations, and removing that dead weight actually makes their other locations more valuable.

The conclusion here is that this news makes the investment market for Walgreens properties hotter than usual — Walgreens stock has jumped 6% on the news.

Under our NAI roof here, our overall highest-producing broker over the last several years also happens to specifically be a Walgreen’s expert. Senior VP Mary Alam, working with Investment Advisor CJ Brill, generally covers our retail channels here at NAI NorCal. And within that work, several transactions for both buyers and sellers of Walgreen’s-leased properties have crossed their desks.

The team very recently closed a deal here in the SF Bay Area, as well as representing locations in California’s Central Valley, Sacramento and South Carolina. And they have multiple off-market Walgreen’s options right now. And if you’re looking nationwide, we’ve also got Managing Director Joby Tapia representing a Walgreen’s property in Atlanta, in contract with contingencies removed.

ALL of these properties are the kind of high-traffic, high-performing, market-leading locations that Walgreen’s invests more into while they trim elsewhere. So contact us today if you’re interested in moving on this news while the ink is still wet… 

 

A little perspective on the retail apocalypse

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Our friends at the listing and research platform CoStar have released another interesting report on the impending retail apocalypse.

The Amazon Effect, and the societal retreat into robotic Instagrat lifestyles, is turning 2019 into the heaviest year ever for retail store closures. However. If you read between the lines, you see that while more stores are closing, less square footage is involved.

More than 10,000 stores have announced a closure this year, almost twice last year, and 3,000 more than during the downturn in 2008. Yet while last year saw 155 million square feet close, this year that space is down roughly 30%.

So it appears the Sears, Kmarts, JCPenneys, and similar anchor tenants of yesteryear have gone through their New Economy purge, and now it’s time for the GNCs, Gymborees and Payless stores. E-commerce has its sights on 10,000 sqft and under this year.

But more importantly, these numbers do NOT show a death knell for retail. It’s really more of a cleansing and realigning. Deliverable retail goods — those that can’t be offered via a better user experience than direct-to-your-door convenience — are taking their mid-/small-/boutique stores down. But! There’s growth in the Un-Amazonable.

This includes personal services, restaurants, grocery/drug stores, fitness and sports, healthcare, and even movies and entertainment outlets. These retail establishments are all showing a healthy upward trend.

So. If you have a retail property — or you’re in the market to invest in one — but you’re uncertain about what tenants are promising and which might be at risk, then talk to us.

US Neighborhoods with the Best Property ROI

The San Francisco Business Times released this report yesterday after crunching some Zillow numbers, showing the 20 neighborhoods in the US that have delivered the best return on real estate investment in the past 10 years. 

Many of the most lucrative markets lie north of San Jose…right in our wheelhouse. 

Now granted, this list looks at residential real estate. But we’ve all heard that rumor about a rising tide lifting other boats. As the Bay Area and Northern California has grown, it has ALL grown.

Let’s walk through this logically. People want to live in the dynamic City of San Francisco, or near their jackpot job in Silicon Valley. But they don’t want to spend what it costs to live there. So they fan out into the perimeter, raising demand in Richmond, Stockton, Merced.

Well guess what? It’s not just home-buyers in that scenario. It’s renters of multifamily units too. And now those people want shopping centers and auto repair shops and chiropractic offices. 

So if you’re looking for an ideal spot for a commercial investment, you might look at where the people are. Here’s where demand has grown the most.

Want to think about buying or selling in these areas? Consult with one of our advisors. 

What are San Francisco’s plans for Mid-Market?

 Mid-Market’s vacancies, stalled developments trigger plants to activate dormant sites.

Stalled developments have meant boarded-up walls, vandalism and empty storefronts have become all too common along the upper stretch of Market Street. The city is hoping a new type of temporary permit will spark change.

Read more on NAI Northern California’s newsletter

What’s the hold-up on housing development in the Bay Area?

Bay Area paradox: We need housing, but we don’t want to build faster.

Chronic lawsuits against new Bay Area housing developments. Loud, angry protests against pro-growth legislators and mayors. If the Bay Area has an all-season contact sport, it’s the recurring NIMBY fights against housing construction. And although almost everyone agrees housing prices are too high, few want to see faster development to tackle the problem, according to a recent Bay Area poll for the Silicon Valley Leadership Group and this news organization.

Read more on NAI Northern California’s Newsletter

Can opportunity zones improve Calfornia’s economy?

How federal ‘opportunity zone’ tax incentive can help California build an inclusive economy.

The federal opportunity zone program created by the 2017 tax overhaul, enables investors to defer capital gains taxes on funds invested in designated communities. Opportunity zones offer one path forward that relies on private capital to bear the cost. The program is designed to attract investors holding $6.1 trillion in unrealized capital gains, according to the Economic Innovation Group.​

Read more on NAI Northern California’s Newsletter

How are Tech IPOs affecting Bay Area Housing?

How upcoming tech IPOs could affect the Bay Area housing market.

Last week, San Francisco-based ride-hailing startup Lyft finally filed to go public – the first of what is expected to be a number of area startups (such as Uber, Slack and Pinterest) that could be making the leap from the private market this year. To understand what this means for those living and working in the Bay Area, I talked to a couple of people in the real estate industry to get their thoughts. The short answer: The IPOs will almost certainly impact inventory and pricing.

Read more on NAI Northern California’s Newsletter

Is Bay Area housing still a sizzling hot housing market?

Even cool, Bay Area housing market is still hot.

The San Jose housing market has cooled more than any other in the country — and it’s still the hottest in the nation, according to a recent Zillow survey. The bidding wars and quick cash sales have abated, and home sellers are cutting prices more often and waiting longer to close deals than a year ago. But middle-income families still struggle to afford the median-priced home of $1.2 million in the San Jose metro area. A typical family needs to put about $600,000 down to fit that mortgage comfortably in their budget.

Read more on NAI Northern California’s Newsletter

 

 

How are there over 100,000 vacant homes in the San Francisco metro area?

An estimated 100,025 homes are sitting empty in the San Francisco metro area.

Compared to other cities, San Francisco metro area’s vacancy rate is actually low at 5.6 percent. Of the 1.784 million households counted in the census region, roughly 1.684 million are occupied. LendingTree concludes a region like San Francisco – which includes Oakland, Hayward and surrounding areas is what’s considered a sellers’ market, meaning people selling their homes will easily find buyers, while future homeowners will struggle to buy. Anyone who has tried to buy a home in the city in the last decade knows this to be true.

Read more on SF Gate