Publication: San Francisco Business Times
Date: January 2, 2014
For the first time in many years, Bay Area renters are moving into thousands of new apartment units, and with about 21,000 more units under construction, many more renters will get the chance to live in new developments as well.
In a region where supply of housing never seems to meet demand, one would think the influx of new homes would help quell housing woes, and it remains to be seen if, once all these units are delivered, rents and home prices will moderate.
Among the influx of new projects is NeMa, a 754-unit complex in Mid-Market near Twitter’s headquarters, where studios start near $2,300. Developer Crescent Heights brought to the market its first phase of units with plans to release the remainder early next year. It is one of the largest multi-family projects San Francisco has ever seen.
Several new rental buildings welcomed residents in 2013 and more than 5,000 multi-family units are under construction in San Francisco — a substantial boost for the city but about half of what’s been built in the South Bay, according to data from Cassidy Turley.
Despite the new supply, developers still expect rent growth and don’t see any signs of overbuilding, said Jeff White, senior development director for AvalonBay.
“After a couple of pretty quiet years, there’s a burst of activity and a fair amount of supply coming on in 2014 and 2015,” he said. “Rent growth will continue to be significant until new supply gets on the market. For the most part, rents have held up in 2013. Next year is not expected to be as strong, but still a positive gain.”
While a backlash against new developments is coming to a boil in San Francisco, the East Bay is gearing up for a housing boom. Apartment development in the East Bay typically lags behind the west and South Bay, but currently about 3,000 units are underway and thousands more are in the planning phases.
Development activity has been particularly strong in Berkeley, Emeryville, Dublin and Walnut Creek — cities that have strong transportation connections to BART or freeways.
Laconia Development plans to break ground in February on 157 units with 23,000 square feet of retail at 1500 N. California St. in the middle of downtown Walnut Creek, a city that has seen a flurry of apartment development in recent years with more than 1,000 units in the pipeline.
Besides its BART connection, Walnut Creek boasts a strong downtown retail district, restaurants and nightlife that is helping transform the city and attract a new demographic seeking a more urban vibe than was once associated with outer East Bay suburbs, said Paul Menzies, head of Laconia.
Rents for new units in Walnut Creek will be around $3 to $3.50 per square foot compared with $4 to $5 per square foot in San Francisco.
“Walnut Creek is reaching that critical mass going from suburban to more of a city feel,” Menzies said. “It’s never going to be San Francisco, it doesn’t want to be. But it will offer the best of urban living with a range of services and entertainment options.”
City to watch
Equity Residential is building a 168-unit project in this compact East Bay city, and Essex Property Trust is under construction on 193 units with several hundred more on the way. Holliday Development recently entitled a 105-unit project, and developers Thompson Dorfman and SRM Ernst Development Partners plan to rework a former Sherwin-Williams factory site into 460 housing units, 70,000 square feet of office space and 15,000 square feet of retail space.
Developer to watch
While many developers in San Francisco are still focused on apartments, Trumark Urban burst onto the scene a couple of years ago, swiftly picking up seven development sites for more than 500 condos. The developer, a division of Trumark Cos. headed by Arden Hearing, broke ground this fall on Amero, a 27-unit project at 1501 Filbert St. — a rare Cow Hollow housing offering. Sales for Amero will start in spring of 2014.
Key events from 2013
Luxury in Mid-Market: NeMa opened the first phase of its neighborhood-changing development in Mid-Market. The entire project will add 754 luxury apartments near Twitter’s headquarters once it’s complete. With studios starting near $2,300, the building is on the high-end of San Francisco rentals.
Essex to buy BRE: Essex Property Trust agreed to a $4.34 billion deal to buy BRE Properties, a deal that would combine two of the Bay Area’s biggest and busiest apartment developers. The deal highlights competition among apartment developers to keep growing and adding units in tight markets.
Plan Bay Area: Bay Area officials approved Plan Bay Area, a guide for future development that spells out how much new housing each of the Bay Area’s 101 cities must accommodate in the coming years. Overall it calls for adding almost 188,000 housing units by 2022 in response to a state law. Within a month, several environmental groups filed lawsuits against the plan.
Oakland’s housing comeback: Ellis Partners proposed 665 units of housing in two towers in Jack London Square, indicating that interest in housing development in Oakland is making a comeback. The sites for the prospective towers are approved for commercial buildings, but residential development is what’s hot in Oakland.
Bakery Lofts lures tenants: Madison Park Financial wrapped up construction on Bakery Lofts phase 3, the only new apartments completed in Oakland in 2013. The apartments quickly attracted tenants, many from San Francisco, looking to live in brand-new units at a much lower price than other Bay Area cities.