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? 

1920walgreenwindow

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

Payless_Store_Closing-2

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. 

NAI Northern California Presents: Record-Breaking Sale of 25 Units in Lafayette

Sale of 3535 Brook Street in the East Bay Area by NAI Northern California sets record price per unit and per sq. ft.

LAFAYETTE, CA –  August 6, 2019 –  NAI Northern California is pleased to announce the sale of 3535 Brook Street in Lafayette for $12 million, which shatters the previous pricing record by more than $50,000 per unit and $44 per square foot. The Mitchell Warren Team and Berger Mandel Team represented both the buyer and seller, delivering an unsolicited all-cash offer. This 25-unit apartment building is blocks from Mt. Diablo Boulevard and from the Lafayette BART station.

“The buyer was looking for assets in the Lafayette market, and our team was able to secure a property that he had wanted to purchase for many years,” according to Vice President Tim Warren. “This was definitely a win/win transaction for both the buyer and seller.”

3535 Brook Street is a fully leased 25-unit apartment complex, a rare multifamily asset in the Lamorinda market. It features an on-site laundry, swimming pool, spacious garden, and generous parking. The site is conveniently located just a block away from Lafayette Square and the downtown shopping district and within walking distance of local schools, library, restaurants, and other amenities.

Lafayette is known for its pastoral rolling hills, good schools, and wealthy inhabitants. In 2016, the median household income in Lafayette was over $140,000, more than twice the statewide average and about two and half times the national median.

It is rated #5 in “Best Places to Live in Contra Costa County” and boasts a thriving nightlife without sacrificing the “small town” feeling and pleasant weather for the variety of outdoor amenities in the vicinity.

Lafayette is also near several local attractions, including but not limited to the Lafayette Hillside Memorial, Lafayette Reservoir Recreation Area, and Briones Regional Park.

The Mitchell Warren Team is comprised of Kent Mitchell, Tim Warren, Randell Silva, and Alex Lin. The Ethan Berger Team is comprised of Ethan Berger, Benjamin Mandel, and Garrett Blair.

 

About NAI Northern California

NAI Northern California is a full service commercial real estate firm serving the San Francisco Bay Area and beyond. Our team delivers technology-enabled commercial real estate services that create value for our clients, industry, and communities.

NAI Northern California is a partner of NAI Global, the largest commercial real estate brokerage network, with more than 375 offices worldwide and over 6,000 professionals completing in excess of $20 billion in commercial real estate transactions globally.

Recently on the San Francisco Business Times Book of Lists, NAI Northern California hit the top 5 and 6 spots in San Francisco and the East Bay and top 15 Bay Area wide. NAI Northern California is part of the NAI Global network, recently recognized by Lipsey as the number 4 most recognizable commercial real estate brand.

Lucca Ravioli building asks $1.45M

Famed Valencia Street cornerstone for sale in triple-building package.

The building that for nearly a century housed Lucca Ravioli Company on Valencia Street is, as anticipated, up for sale. It’s part of a three-building package along with the two related buildings, all stuffed with a price tag of more than $8.28 million.

According to to the official history of Lucca Ravioli, the Italian goods store opened its 1100 Valencia Street locale in 1925 (18 years younger than the circa-1907 building it occupies), a family owned-institution that has endured through booms, busts, world wars, depressions, and the ever-changing character of the Mission District.

But as Eater SF reported in January, the neighborhood received shocking news that Lucca Ravioli will sell its last batch of tagliarini on April 20.

According to the San Francisco Chronicle, no one will take over the family business once 50-year proprietor Michael Feno retires. The sale of the off-the-market building will certainly finance quite a retirement in today’s market.

1100-1118 Valencia St. is presented for sale by Jordan Geller and J.B. Williams of NAI Northern California. Click here for more details on this listing.

 

Read more at Curbed SF

 

 

 

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

 

 

NAI Northern California Presents the Opportunity to Acquire the Lucca Ravioli Buildings Located on Valencia St.

1100-1118 Valencia St. Portfolio Sale.

 Jordan Geller and JB Williams of NAI Northern California are pleased to present as exclusive advisors, the opportunity to purchase jointly or as a portfolio, the three mixed-use properties located at 1100, 1102-1110 and 1114-1118 Valencia St. The associated business, Lucca Ravioli Co., has been operated from the retail storefront located at Valencia and 22nd Streets by owner Michael Feno for 53 years and has been in business for 94 years. After exploring many possibilities and having reached retirement age with no successor generation to continue the business, he and his family have made the difficult decision to close Lucca Ravioli effective Easter 2019. He would like to thank the many customers for their continued patronage and enthusiasm for the business over the years.The sellers understand that for generations Lucca has been a prominent local business and its absence will be felt by many, including San Francisco’s Italian American Community. They hope that Lucca Ravioli will be remembered fondly and that its location will continue to serve the neighborhood in a productive way.*The image above is a rendering of a potential conversion of two of the street level commercial spaces to a new retail use and is not representative of the current building configuration for the two non-corner buildings.

Contact NAI Northern California Vice President Jordan Geller and Investment Advisor J.B. Williams for more information. 

About NAI Northern California
NAI Northern California is a full service commercial real estate firm serving the Northern California Bay Area. Our team delivers technology-enabled commercial real estate services that create value for our clients, industry, and communities.NAI Northern California is a partner of NAI Global, the largest commercial real estate brokerage network with more than 400 offices worldwide and over 7,000 professionals completing in excess of $20 billion in commercial real estate transactions globally.www.nainorcal.com

 

Big downtown San Jose housing towers, retail, restaurant complex pushes ahead

A big development that will bring downtown San Jose two striking residential towers containing more than 600 dwellings, along with spaces for a restaurant, coffee shop and retailers, is slated to push ahead with construction this month, according to a realty executive.

Miro is a housing high-rise that would dramatically reshape San Jose’s skyline and become its tallest towers.

The project has gotten through a three-month delay after workers hit an aquifer and water poured into the construction site, creating a large pond that had to be controlled and pumped out.

Now that project developer Bayview Development Group has vanquished the water woes, contractors are expected to begin pouring the surface concrete slab within the next few weeks, a necessary prelude to construction of the vertical components.

 

The development would include two towers that each will rise 28 stories and will also offer 18,000 square feet of commercial space, including enough room for a sit-down restaurant, a coffee shop and other retailers.

 

The project fronts on East Santa Clara Street as well as the corners of North Fourth and North Fifth streets. It’s right across the street from San Jose City Hall.

 

 

Read more on East Bay Times

 

 

Google is gearing up to buy prime San Jose land for a new tech campus. What now?

As the city of San Jose gets ready to release long-anticipated documents related to the sale of 20 acres of land near downtown, the question on the minds of both boosters of the Google expansion and skeptics is “what now?”

The city of San Jose is on the verge of releasing details of a controversial 17-month negotiation to sell 20 acres of publicly owned land to tech giant Google for a massive new campus near downtown.

Those details, set to be released Friday, are a key milestone, but only the first step of making the Bay Area’s largest city one of the next expansion points for Alphabete Inc.-owned Google, a plan that has been met by community members with both excitement, deep disdain, and as of this week, a lawsuit over transparency.

Now, as the release date of the long-anticipated land sale documents near, the question on the minds of both boosters of the Google expansion and skeptics is “what now?”

First, the end goal: Google has said it wants to build a mixed-use campus that could span as large as 8 million square feet and would include housing, retail, and office space next to transit. Somewhere between 15,000 and 20,000 workers could show up each day at the campus if built out fully.

 

 

Read more on Silicon Valley Business Journal