Bay Area ranks as the best commercial real estate market in the country, again!

For the second year in a row, the Bay Area ranked as the best market for commercial real estate in the country, according to a report from the Wells Fargo Economics Group.

The report found that the Bay Area’s strong gains in employment, housing inventory and technology sector push the Bay Area far ahead of other markets in terms of increasing value and potential for more growth.

“The San Francisco Bay Area remains the epicenter of many of the most rapidly growing technology sectors, including mobile devices, social media, cloud computing, data analytics and life sciences,” the report states. “Overall job and income growth have significantly outpaced the nation in recent years and the unemployment rate has fallen to its lowest level in nearly six years.”

The report demonstrates the tight relationship between jobs and real estate, pointing to deals like Salesforce.com leasing 714,000 square feet in an office tower under construction. That tower will eventually house thousands of jobs, many of them yet to be created, and Salesforce is just one of numerous tech companies expanding in the Bay Area.

The Wells Fargo report provides detailed analysis of the Bay Area’s submarkets of San Francisco, the Peninsula, Silicon Valley and the East Bay. Here’s a sampling of highlights:

Some industries like financial services are shrinking like in the case of San Francisco-based Charles Schwab & Co. deciding to move 1,000 jobs out of San Francisco to places like Colorado and Texas.

Fortunately, the technology sector is growing much faster than other sectors are retreating.

Tech is booming in San Francisco, but the Bay Area’s true tech capital is still Silicon Valley.

Technology firms have not abandoned the suburbs. Job growth in Silicon Valley remains exceptionally strong. … Technology firms employ about 270,000 workers in the San Jose metropolitan area, which includes Santa Clara and San Benito counties. Total tech employment in the San Jose metropolitan area is 73.4 percent higher than the number employed in the San Francisco metropolitan division.

Still, many tech workers prefer to live elsewhere.

Household employment growth has risen more slowly in South Bay, however, climbing just 3.3 percent over the past year, which implies a significant number of workers are commuting into Silicon Valley from San Francisco, Oakland and other neighboring areas.

Jobs and housing are great here, but transportation connects it all together. You can debate high-speed rail all you want, but turns out strong commuter systems boost the entire region.

A major modernization program is now under way, which will extend service to the Transbay Transit Center being developed in San Francisco’s booming SoMa area and move from diesel-electric locomotives to overhead-electric powered trains by 2019. The growth of the system, which will more firmly connect the major hubs of the Bay’s tech sector, the San Francisco and San Jose airports, and many of the region’s key sports and cultural venues, has become a major driver of residential and commercial development.

Everybody loves a growing economy. Well, not everybody. Growth comes with repercussions.

With employment and population growth exceeding expectations, worries are beginning to surface that the latest boom is showing signs of overheating. Explosive growth in the Bay Area’s creative industries is beginning to crowd out activity in parts of the financial and professional services sector. The boom has also sparked a backlash by some individuals tied to slower growing and lower paying parts of the economy. Home prices, apartment rents and office rents have also increased dramatically, which has significantly increased the cost of living and doing business in the Bay Area. Despite these developments, we still expect the Bay Area to outperform the nation. While costs have increased dramatically over the past year, so has the quality of life.

If any region would be familiar with tech booms and busts, it should be the Bay Area. So when is our bust coming, if at all? Economists expect this cycle to have a smoother landing that the first tech boom.

The dependence on technology has raised concerns about the vulnerability of the Bay Area’s economy to another dot com crash. The prospect has gained increased attention in recent months, which have seen a number of extremely highly valued acquisitions of tech startups and a few disappointing IPOs. While every boom must eventually end, traditional valuation measures are much different than they were during the run-up during the tech bubble in the late 1990s.

Source: Blanca Torres (Reporter) – San Francisco Business Times

 

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Buyer-Seller Dynamics in San Francisco

This April 2014 analysis was based upon a survey of Paragon Real Estate Group agents regarding their past 12 months of activity: Paragon agents close over 1000 San Francisco home transactions per year; Paragon’s Van Ness office represents more buyers in successful city home purchases than any other brokerage office.

All percentages are approximate: This was not a rigorously controlled survey and analysis, but more an informal poll; still we believe the data below does generally reflect market dynamics in San Francisco.

San Francisco Home Sellers 

60% are selling to relocate outside of San Francisco: The main reasons, in order of prevalence, are schools (and other family-raising reasons) — which ties in with the fact that SF has the lowest percentage of children of any major city in the country — affordability (the ability to buy more home for the money elsewhere), job-related reasons (relocation, commute) and retirement.

15% involve trust, probate or investor sales, or people moving into rentals or retirement homes, and no new home purchase is involved.

25% are selling in order to buy another property within the city, typically either upgrading to a more expensive home or downsizing to a smaller home, or a divorce is involved.

San Francisco Home Buyers 

50% are first-time buyers. This is a very high percentage: In the U.S. the percentage is about 30% (and, of course, the U.S. median price is under $200k, while the SF median is over $950,000).

Average age of SF home buyers is generally getting younger and is currently in the mid-thirties.

47% of SF home buyers are employed in high tech. This is a distinctly San Francisco phenomenon related to the first 2 points above: An influx of relatively young, often newly affluent, high-tech employed, often first-time buyers – who can afford SF home prices – is playing a decisive role in the market.

20% of prospective SF home buyers have become discouraged and given up on buying in the city, due to the competitive environment and rapidly appreciating prices. They’ve either given up for the time being or shifted their home searches elsewhere.

Less than 3% of SF home buyers are foreign – exposes the myth of foreign money playing a significant role in the SF market. What purchases/investments they are making seem to be mostly in new or newer, high-rise condo developments. (There are cities in the U.S. in which large numbers of foreign buyers are having a significant impact on the market – Miami may be the most dramatic example – but SF is not one of them at this time.)

26% of homes are being purchased via “all cash” offers, though many of these offers are structured this way solely for strategic reasons to get their offers accepted in an exceedingly competitive environment. That is, many of these buyers end up getting loans either before or immediately after close of escrow. (This is a different phenomenon than investors paying all cash for distressed homes in other parts of the country – San Francisco has had very few of these sales in the past 2 years.)

Approximately 10% of home sales occur outside of the multiple listing service, i.e. as so-called off-market/ off-MLS/ pocket listings. This agrees with other analyses Paragon and others have performed.

Conclusions: To a greater extent than is probably normal, there is an exchange process occurring in San Francisco, with existing residents moving out and new residents moving in. One of the biggest reasons for selling is to relocate for better public schools outside SF or to save money by enrolling children in suburban public instead of city private schools; high prices are motivating some city homeowners to cash out to buy bigger/better homes elsewhere; frenzied market conditions are discouraging homeowners who might otherwise sell to buy other (larger, better) homes within the city – many of these homeowners are staying put out of trepidation. This last situation is affecting/lowering the supply of homes for sale.

Population/ Employment Growth and Housing

According to the latest U.S. census data, the estimated increase in the city’s population since 2010 is 32,000; over the same period, the number of employed residents has jumped by over 55,000. Per the Planning Department, the approximate number of new housing units added since 2010 is 4200. With 38% of SF’s households consisting of 1 person, and an average household size of 2.3 persons, we’re looking at over 22,000 new residents who have been looking for homes that don’t exist. This is one of the biggest factors behind the huge upward pressure on rents and home prices.

With the market recovery that began in 2012, another 6000 housing units are currently under construction and most should be ready sometime in the next 2 years. Housing units include condos (sales), apartments (rentals), houses (a very few) and community housing projects.

This analysis was performed in good faith with data from sources deemed reliable,
but it may contain errors and is subject to revision.
Source: Paragon
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FOR SALE: 1769 14th St. Oakland, CA

FOR SALE:

1769 14th St. Oakland, CA

Asking price: $399,000

40653176
Residential
Contemporary
2
2
1
1054
$191.00
Tina C. Wong 510-502-6018
N/A

Exquisite floor plan with high ceiling & amazing modern design 2BD/2.5BA townhouse in Zephryr Gate Development. Bamboo floors, granite countertops, ample of cabinets, stainless appliances & high end finishes throughout this home where has a spacious & airy feel as you enter into a kitchen/LR/DR open floor plan, that leads to a balcony. 2 master suites across from each other providing privacy.

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Bay Meadows Unveils ‘Social Street’ Concept

Bay Meadows Delaware St_San Mateo real estate The Registry

 

The developer of the massive master-planned Bay Meadows project in San Mateo has unveiled the design for a community commons it is calling a “social street,” that it expects will become a regional hot spot of action-filled spaces ranging from a beer garden and bocce ball court to a bandshell for events and entertainment.

Just like shoppers who may window-shop at different retail stores in a mall, those living, working and visiting the San Mateo development will be able to walk Delaware Street and check out the diversity of “park rooms,” said Kevin Conger, principal at San Francisco-based CMG Landscape Architecture, which is creating a comprehensive network of streetscapes at Bay Meadows that connect nearby public transit, homes and other mixed uses to sustainably designed open spaces.

 

Bay Meadows unveiled Delaware’s “social street” concept and renderings, which were not previously detailed in the burgeoning community’s plan, late last week. This street, with its traditional town square, will be a pedestrian-focused social hub of the likes of San Francisco’s chic Hayes Valley neighborhood or San Jose’s upscale Santana Row.

“It’s a street as a destination,” said Conger, who hopes Delaware can become a draw to those in the South Bay as Santana Row is for those on the Peninsula. “I hope it will become a regional destination.”

The street is “programmed with a lot of outdoor uses that people working and living in the community can enjoy and come together,” said Janice Thacher, partner with Wilson Meany, the San Francisco-based developer of Bay Meadows. “The street will be active and lively. We think it’s an exciting concept that will add a lot to the community.”

As envisioned, Delaware will also augment the future retail environment at Bay Meadows. “If we can invite enough people [to Delaware] … I think the retail will come,” Conger said.

Along one side of this street, five office buildings will add to the area’s vibrancy. For instance, the buildings will feature a long street frontage that can host retail uses, said Paul Woolford, director of design at HOK, a global architecture, engineering and planning firm that is part of the Bay Meadows project team. A large courtyard park will also house retail, he said.

“Some buildings will have arcades so people can walk through them,” Woolford added. Moreover, building lobbies will feature large pivoting glass doors that when open “can erase the boundaries” between outdoor and indoor spaces. So a party or presentation happening outside can spill into the lobby or vice versa.

No timeframe was given as to when construction of the social street would begin and finish, but development of Bay Meadows is expected to last the next three to four years.

Bay Meadows, once the site of an airfield and later a horse-racing track, is now being developed as a thriving, downtown-style urban village to include more than 1,100 units of housing, 1.5 million square feet of office space, 15 acres of parks, bicycle paths and hiking trails. The Nueva School, a nationally recognized independent institution serving gifted students, will also open its campus in Bay Meadows this fall.

Bay Meadows has eight planned residential neighborhoods, and the first ones that have gone on sale are communities by TRI Pointe Homes and Shea Homes. So far, more than 100 of the 156 already constructed homes have been sold with families moving in. More than 100 apartment units are also under way.

Woolford described Bay Meadows as taking transit-oriented development to the next level. “Bay Meadows is the very best example of a new type of work environment where it’s not just office buildings in a parking lot,” he said. “It’s a workplace, live and stay environment where people can work, shop, exercise and get on a train to go anywhere in the Bay Area.”

 

Source: Neil Gonzales

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Lennar’s Hunters Point Development Now Has Prices

shipyard012314.jpg

The Lennar development slated for Hunters Point now has the name The San Francisco Shipyard, and some pricing scales recently hit the Curbed inbox. Based on current market rates, prices are set to begin in the low $500,000s for one bedrooms, and the high $500,000s for two bedroom homes. If all goes according to plan, the first 247 market rate and affordable units will be ready for move-ins by this fall with an additional 3,000 units coming in the next five years. Now that the project got its recent approvals and the 49ers have officially vacated, things are moving along quickly.

Picture & source: The San Francisco Shipyard [official site]

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San Francisco Rising: Transbay, Trinity, Salesforce Towers

Tower: 350 Mission Street
Height: 424 feet, 30 floors
Architect: Skidmore Owings & Merrill
Specs: 420,000 sq. ft. office space (fully leased by Salesforce.com), 5,400 sq. ft. ground floor retail, 9,650 sq. ft. public open space
Currently: As you can see in the photos above the elevator core has risen well above street level. Rebar for what will be the vertical support columns is also poking above the street. With the basement levels nearly finished expect the building to begin growing at a pace of about 2-3 floors per month as it continues its ascend above the surface.

 

Tower: Transbay Tower
Height: 1,070 feet, 63 stories
Architect: Pelli Clarke Pelli
Specs: 63 floors, ground floor retail, public plaza, bridge connecting to Transbay Transit Center, public art.
Currently: The last time we checked in on the tower, permits were issued and excavation was in an exploratory phase. We now have some seriously heavy-duty equipment on site and a more permanent construction fencing installed. A quick word with an onsite contact confirmed that this project will be entering full-scale excavation immediately.

Tower: Trinity Place
Height: 22 floors
Architect: Arquitectonica
Specs: 1,900 apartments, 1,450 parking spaces, a 42,000 sq. ft. open plaza and 60,000 sq. ft. of ground floor retail
Currently: Construction and excavation crews have recently returned to the site, indicating that phase three is preparing to get moving along. Crews will begin excavating space for a massive underground parking structure featuring 1,450 parking spaces. Its unclear whether phase three will include the final two buildings remaining, or if there will be a fourth phase to complete the 1,900-plus apartment complex.

Source: curbed

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Bay Area commercial real estate boom on track for record year

A surging tech economy has sparked a Bay Area commercial real estate boom that is on track to make 2013 the best year on record.

New construction and renovation of commercial real estate — including office, retail, industrial and hotel properties — will exceed $6 billion this year across the nine-county Bay Area, according to this newspaper’s analysis of figures supplied by McGraw Hill Construction, a widely respected source for data about the development and building sectors.

Mike Fau, left, and Bob Gongora help install a window at a Santa Clara Gateway office complex building under construction in Santa Clara, Calif. on Monday, Nov. 4, 2013. (Jim Gensheimer/Bay Area News Group) ( Jim Gensheimer )

“High tech is spurring this — you have the Facebook, Samsung and LinkedIn buildings that have gone up or are going up, and you have expansions by Google (GOOG) and Apple (AAPL),” said McGraw Hill economist Anne Thompson. “The economy is improving in the Bay Area. You have strong hiring in high tech that is spurring more demand for office space.”

Through the first nine months of this year, the value of Bay Area commercial real estate construction totaled $4.9 billion. That already was more than the full-year totals for 2009, 2011 and 2012, and was approaching the $5.41 billion annual total for 2010.

Total commercial real estate spending in the Bay Area for 2013 is projected to be $6.3 billion to $6.7 billion. That would be the largest amount documented by McGraw Hill, whose records are based on building-permit data and go back to 1967. The current record was set in 2000, when Bay Area construction activity reached $6 billion.

The boom is not spread evenly across the region, however. Santa Clara, San Mateo and San Francisco counties all are seeing a surge in construction, while the East Bay counties of Alameda and Contra Costa are lagging far behind.

Jeff Hoopes, chief executive of Swinerton Builders, said the building boom does not appear to be a bubble. “This surge is a direct result of job creation.”

Chad Leiker, a vice president with commercial real estate firm Kidder Mathews, said the development surge resulted from rising rents, which “are finally high enough to justify developers taking risks on construction or renovation of buildings.”

The tech sector upswing has made Santa Clara County the Bay Area’s top region for commercial real estate construction, McGraw Hill found. For the first nine months of this year, commercial real estate construction in the county totaled $1.86 billion, and it could reach $2.17 billion by the end of the year. That doesn’t include the $1.3 billion Levi’s Stadium project underway in Santa Clara because McGraw doesn’t count open-air stadiums in its totals.

Among the tech companies that have contributed to the commercial real estate boom is Infoblox, a software company that struck a deal last year to expand to a new headquarters in Santa Clara. It would be able accommodate 500 employees, up from 250 in the middle of last year.

“We were bursting at the seams in tired old spaces in Santa Clara,” said Shawna Belardi, global facilities manager for Infoblox.

This year, Infoblox moved into an office complex that had undergone an extensive renovation by developer Bixby Land, which added fire pits, sports courts, a gym, a cafe and other amenities to help the company attract and retain engineering talent.

The Infoblox renovation is part of a trend. In the South Bay, much of the construction involves face-lifts or replacements of existing buildings, said Phil Mahoney, executive vice president with commercial realty firm Cornish & Carey.

“The renovation and upgrade of existing buildings is unprecedented,” he said. “I have never seen anything on this scale in 30 years of being in the business.”

Builders also are succeeding with new projects. Santa Clara Gateway, a 916,000-square-foot complex near the Great America amusement park, found tenants quickly, said Andrew Goodman, regional vice president with Irvine, the project developer.

“Dell and Arista were the first deals, and then we got Global Foundries,” he said.

Plenty more projects are in the pipeline.

Apple is expected to begin construction next year on its new campus in Cupertino, which published reports say could cost $5 billion. Google, while facing delays with its second campus at the NASA Ames Research Center, still intends to build the Mountain View complex.

Jim Beeger, a senior vice president with Colliers International, does not see the market cooling any time soon.

“At the beginning of this year, we had 20 tenants that were looking to lease space of 100,000 square feet or greater, and now the number is 31,” he said.

Experts say further spurts of commercial construction could result from the desire by young tech workers to live in urban centers such as San Francisco and San Jose — even if they work elsewhere in Silicon Valley. To accommodate those workers, developers are laying plans for housing, office and retail clusters on or near light rail, Caltrain or BART train routes.

After Santa Clara County, San Francisco County is poised to post the second-highest commercial construction activity in the Bay Area this year with a total of $1.95 billion. That would be well ahead of the totals for 2011 and 2012, but below the level of 2010, McGraw Hill reported.

San Mateo County is expected to see $765 million worth of commercial real estate construction this year, which would be six times the amount for 2012.

In contrast, the East Bay remains in a slump. The combined totals of commercial real estate construction in Alameda County and Contra Costa County are on track to reach $681 million, which is lower than all of previous four years.

“The East Bay is a real laggard in development right now,” said Edward Del Beccaro, a managing director with Transwestern, a commercial realty firm. “The main construction activity in the East Bay is medical buildings and some retail. Otherwise, the East Bay is dormant.”

The remaining Bay Area counties — Marin, Sonoma, Napa and Solano — are projected to produce a combined $187 million in commercial construction, which would be 2.8 percent of the projected Bay Area total this year.

Source: Mercury News

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Bay Area housing market stabilizing

After years of post-bubble turbulence, the Bay Area housing market appears headed for a period of stability as rapid price increases hit a wall and sales plateau.

October median sale prices for existing houses were up double digits from a year ago, but were down from peaks in June and July, DataQuick reported Wednesday. Sales of existing single family houses were down 6.8 percent across the Bay Area from the same month last year, though up slightly from September.

Without the frenzied competition that characterized the first half of the year, buyers are being more selective and sellers have to be more patient and realistic in their pricing.

“There’s more to choose from, less sense of urgency, and probably fewer people out there shopping,” said Andrew LePage of DataQuick. And the spike in interest rates during the summer also discouraged some buyers, he said.

“We’re clearly cooling off a bit,” said Lanny Baker, chief executive of ZipRealty, who noted that pending sales in the Bay Area ended October down 7 percent from the previous year. Nationally, and in the Bay Area, he said, housing prices in the cities with the strongest gains of early 2013 are moderating, and lagging markets are starting to accelerate.

But there are plenty of hot spots with low inventory and high demand. In Menlo Park, Palo Alto and Atherton, “We don’t have enough houses to sell,” said Wendy McPherson of Coldwell Banker. “Some parts of the market of course are slower by nature of the price range. That’s normal. But under $4 million we do not have enough houses to sell.”

Peter Giovannatto with Dreyfus Sotheby’s International Realty in Palo Alto said the “baseline price” for real estate there is $1,000 a square foot. “We’re getting random emails from investors offering $1.4 million to $1.6 million for lots,” he said.

Santa Clara County‘s median of $713,000 was up 15 percent from a year ago, but down 5 percent since June. San Mateo County‘s median price of $782,000 was up almost 15 percent from a year ago, but down almost 10 percent from a high in August.

Alameda County‘s median sale price was $568,000, up 35 percent from last year but down nearly 4 percent since a summer peak. Contra Costa County’s median sale price of $395,000 was up 31.7 percent from October 2012 but down 12 percent from July.

Alameda County saw a 13.4 percent annual drop in sales. Contra Costa County sales were down 5.5 percent from a year ago; Santa Clara County sales slid 1.9 percent from last year, and San Mateo County sales were down 13 percent annually.

“The multiple-offer hysteria has started to even out,” said Hank Perry of Empire Realty in Danville. “Confidence is back” among buyers moving up to larger homes, he said. “A large part of what’s driving the market is they feel they can go out and get what their family deserves” as a more relaxed market allows them to shop around.

Around the bay, there are more reports of homes sitting on the market for longer periods, and here and there a price reduction from home sellers unaware of the downward trend who set their price too high.

“Until a few months ago, price reductions were almost unheard of,” said Steve Pierce of Keller Williams Benchmark Properties in Fremont. “Now it’s becoming more commonplace, particularly if properties were not priced reasonably to begin with.”

Pierce said some places and price ranges are seeing brisk demand, and others aren’t. “In some areas where inventory is low, the market is just like the hot market we had earlier in the year. In other areas, buyers are being a little more cautious and a little more careful,” he said.

In Pleasanton, that became clear to Allison Cox, whose home drew lots of offers, only to have the first two back out.

“The next offer we’re waiting to see,” Cox said, adding that she’s happy to have so much interest. “Four or five other homes in the neighborhood have been sitting on the market and they either haven’t had offers or they have been getting offers and not accepting them,” she said.

When their sale is final, the Coxes will face another issue that has caused some people to think twice about selling now.

“We need to figure out where we’re going to live,” she said. “We’re going to come out with a good chunk of equity. Now what are we going to do? We’re in a pickle about it.”

Other factors also point to a more normal market. Distressed sales — foreclosures and sales of houses for less than their mortgage — made up 14 percent of the resale market, less than half of last October’s 35 percent.

All-cash buyers — who are often investors — made up almost 23 percent of October sales, down from nearly 30 percent a year ago.

In addition, banks were making more adjustable-rate mortgages. These are a key part of the high-priced Bay Area housing market. They were 20.5 percent of the area’s October home purchase loans, up from 11.8 percent a year earlier.

 

Source: Inside BayArea News

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