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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

 

 

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

 

Uber sells Uptown Station HQ to Oakland firm

Uber announced in August that it was putting Uptown Station—the new mixed-use development right downtown in the onetime Sears building on Broadway that only recently shed the white plastic cocoon that enshrouded it during rehab—up for sale without ever moving a single employee into its planned headquarters.

But it didn’t take long for an interested buyer to start making eyes at the circa 1929 Beaux-Arts building.

Back in October, the San Francisco Business Times reported that the Oakland-base investment firm CIM Group planned to buy the whole 356,000-square-foot building for $175 million.

As Tuesday morning, CIM announced the sale via press release. The announcement doesn’t include the sale price, and spokesperson Karen Diehl tells Curbed SF “CIM never discusses financial arrangements.”

Uber previous paid $123.5 million for the place, putting millions more into the rehab.

Read more from Curbed SF

San Jose council agrees to buy land near Google project amid resident concerns

SAN JOSE — City leaders Tuesday agreed to buy six pieces of land near Google’s proposed tech village for parking and road improvements despite concerns from some residents that taxpayer dollars are being spent to subsidize the tech giant’s private development.

Mayor Sam Liccardo stressed that the land acquisitions approved Tuesday will support improvements that were planned for decades — with or without Google’s proposed tech campus. Liccardo also said the money pegged for the land buys — about $15 million total — was allocated years ago and that $4 million came from Trammell Crow, Google’s development partner.

Read more from The Mercury News