ULI San Francisco held its annual residential panel at The Omni Hotel in Downtown San Francisco on February 27th, with approximately 200 guests in attendance.
Paul Zeger of Polaris Pacific kicked off the event with an economic overview of the Bay Area’s major residential markets. His talk focused on how San Francisco, Silicon Valley and Oakland/Emeryville have all experienced impressive price and rent growth over the past year. This increase has been fueled by job growth, particularly in the tech sector. At the same time, interest rates have remained low, especially when viewed from a historical perspective. He noted, moreover, that there is and will continue to be, minimal new and existing housing to meet this rising surge in new demand. While new apartment construction throughout the Bay Area will be substantial over the next few years, especially in North San Jose and San Francisco’s Mid-Market neighborhood, there will still not be enough new housing units to meet the demand generated by new job growth. Moreover, new condominium construction is still well below historic trends and there are minimal apartment conversion opportunities.
Following Paul Zeger’s economic overview, Mary Ann King of Southern California-based Moran and Company, the moderator for the event, discussed future supply conditions in the Bay Area. She referred to the Bay Area as the most exciting and robust apartment market in the country and indicated that apartment deliveries from 2013 through 2015 will be two and a half times greater than the trend, with approximately 28,000 apartment completions anticipated for the Bay Area during this time frame.
Mary Ann also addressed questions to the three panelists: Brendan Hayes of Fairfield Residential representing Silicon Valley, Drew Hudacek of Sares-Regis representing the Peninsula, and Eric Tao of AGI Capital Group representing San Francisco. Mary Ann engaged each of the panelists with a range of questions, from how walkability scores impact apartment rents to strategies that improve affordability.
Brendan Hayes started the panel discussion by noting the premium that proximity to retail and transit can add to apartments, especially if the retail or transit stop is within walking distance. According to research conducted by Fairfield Residential and Moran and Company, apartments that offer either on-site retail or retail within walking distance can charge an average of $400 to $700 more per month than communities without this amenity.
Following Brendan’s talk, Drew Hudacek and Eric Tao discussed the obstacles they’ve faced building in the Peninsula and San Francisco, two markets with very long and complicated entitlements processes. Such long and arduous entitlement processes have led to the development of projects that are vastly different based on the city in the case of the Peninsula and by neighborhood in the case of San Francisco. They also led very distinct campaigns to target renters or buyers. AGI / Avant offered designer tote bags to residents of a recently-completed apartment community in San Francisco’s Mission District while Sares Regis built larger, higher-end units with a host of family amenities at their recent apartment community in Foster City.
Despite the general enthusiasm all of the panelists had toward the various Bay Area housing markets, the panelists did provide some notes of caution. Drew Hudacek, for instance, referred to the recent purchase of unentitled land sites by public home builders for $120 to $130 per square foot as a sounding alarm that trouble might be ahead.
The panel conversation ended with a discussion on how to increase affordability throughout the Bay Area, with novel ideas such a transformer units and converting some of the existing market-rate rental stock into affordable housing units. The discussion concluded with a Q/A session as well as a discussion on how technology has changed the way in which developers sell and lease new homes.
Authored by: Miles Garber, Polaris Pacific