S.F. apartment construction boom around the corner

 ------ Joske featured in the Chronicle-----



    After hibernating for years, apartment construction is poised to boom in San Francisco, where desperate renters say those high-rises can't rise high or fast enough.
Largely in response to the city's growing technology sector, 22,000 residential units are in various stages of approval and construction. In a few years, residents could be signing leases for new addresses in South Beach, South of Market, Central Market and Mission Bay.
"There's been so much approved over the last four years that's never been built, so there's essentially a backlog of projects waiting for financing," said John Rahaim, the city's planning director.
Since 2008, only about 1,710 units were built each year, compared with an average of 2,220 each year between 2004 and 2008, according to the department.
Now, five major dwellings that were approved before 2008 and stalled during the recession have been restarted. Developers have begun, completed or been cleared for construction on more than 2,000 units.

More are on the way. Eight residential buildings, with more than 1,300 combined units, received building permits last year. There are permit applications for another $1.6 billion worth of projects, Department of Building Inspection records show.
The upcoming construction boom, real estate observers say, gets its boost from a more stable economy, financiers once again being willing to invest and an incoming wave of employees at local companies like Twitter, Zynga and Salesforce. While some city-mandated affordable housing will be built, many of the new units will be priced beyond the reach of working- and middle-class residents.

"If these tech companies are moving in right now, where are all these people going to live?" asked Joske Thompson, a local real estate agent. "The demand is far greater than the supply right now."

Coming back to life

One site that has come back to life is 1844 Market St., west of Octavia Boulevard, where construction will start in April.
Set to open in fall 2013, the $55 million building will have 113 rental units - 99 market-rate and 14 affordable units.


For years, the site has been a dirt lot. In 2009, builder Joe Cassidy started work on condos there with permits and approval from the city. Then his construction loan fell through.
Last May, MacFarlane Partners bought the property and made plans to build again. One key difference this time: Companies that move to or stay in the Mid-Market and Tenderloin areas are now exempt from the payroll tax on new workers for six years. That sets the stage for Market Street to become vibrant again, starting with Twitter's new headquarters at the former Merchandise Mart.

Pent-up demand

Greg Vilkin, president of MacFarlane Partners, believes the increased activity will translate into housing demand in Upper Market. He's also switched the design from condos to rental apartments.
"There is a strong cohort that doesn't want to buy - they want to rent," he said. "They want the flexibility."
Vilkin's situation isn't unique. A two-tower, 719-unit apartment complex at 1401 Market St., also approved as condos before the recession, was cleared for construction last year. Developers of 201 Folsom St., which stalled after getting approved in 2003, returned to the city last month with plans for a pair of towers with 671 units - 50 fewer than before.
Real estate observers say these inhabitants will likely be singles and couples in their late 20s, as well as parents whose kids have left for college.
Urban living won't be cheap. A two-bedroom apartment at 1844 Market St. will cost $4,500 a month, and a studio $2,500, Vilkin said.
"It's easy to understand why housing is so red-hot right now," he said. "There's been no supply added and the demand is growing rapidly."

High-end rentals

Rents in San Francisco are reportedly the least affordable in the nation. And the rental vacancy rate is 3.2 percent, a study released last year from the real estate firm Cassidy Turley shows. One of the many feeling that crunch is Scott Rasmussen, a 24-year-old political consultant, who has looked - unsuccessfully - at 75 apartments in the last year. "I was just completely clueless as to exactly how difficult it would be," he said.

Even if supply catches up with demand, some worry that working- and middle-class residents won't be able to afford the rents.
The trend "favors the high-end housing market, not the entry-level stuff for the little guys," said Tim Colen, head of the San Francisco Housing Action Coalition. "It's a question of, 'Who gets to live here?' "
There's another question concerning observers: How long will it last?
There is always the chance, Colen said, that the events of 2008 could unfold all over again. "It was endless. It was going to be profits as far as you can see," he said. "And then it crashes."

The Hot Spot for the Rising Tech Generation

By NANCY KEATES and GEOFFREY A. FOWLER

 

Gagan and Jasmin Arneja in their 1,800-square-foot home, which attracted 22 bids and sold for $1.5 million, 40% over asking price.

 

San Francisco
A bidding war broke out in November when a small house in San Francisco's tightly packed Noe Valley came on the market.
Twenty-two people, including employees of Facebook, Zynga, Google and Pixar, battled for the home. The winning offer was $1.5 million—40% higher than the asking price. The house had a great view, but it was only 1,800 square feet and came with an old kitchen which, like most of the interior, was covered in 1970s plywood paneling. Seen from the curb, there's hardly any house at all—just a one-car garage and gate leading to small front courtyard.


The inconspicuousness was part of the attraction, said Jasmin Arneja, 42, who bought the two-bedroom house with her husband Gagan, 40, a software engineer at a networking start-up. "It's the antithesis to these outrageous bizarre Gordon Gekko-esque houses. It just incorporates so much of our values," said Ms. Arneja, who runs a philanthropic advisory firm.
Housing prices in the San Francisco Bay area are once again soaring, thanks to an infusion of cash from the rising shares of Apple and Google and the initial public offerings by Zynga, LinkedIn, Yelp and soon Facebook, expected to be the largest in Internet history. But while a previous generation of dot-com executives opted for mansions in wealthy San Francisco neighborhoods like Pacific Heights and tony Silicon Valley suburbs like Atherton, this generation is gravitating to modest homes and condos in grittier parts of the city.
Ground zero of the current tech-fueled real-estate boom is the Mission, formerly a majority Hispanic neighborhood on the southern edge of San Francisco that's close to the main arteries that link San Francisco to Silicon Valley. Median home prices in the Mission grew 44% in December compared with a year earlier. Adjacent Noe Valley had a rise of 31% over that same period, according to the San Francisco Association of Realtors. The average number of days homes sat on the market in both neighborhoods has almost halved over the past year.
That's in sharp contrast to what's happening nationally, where the housing market continues to flounder, with the Case-Shiller 20-City index down for the fourth straight month in a row. It's even an aberration from the San Francisco area (including Oakland), which saw a 5.4% drop in home prices in December from a year earlier.

Dolores Park, with a view of the Mission District and skyline of downtown San Francisco in the background, is a popular hangout for the new generation of tech entrepreneurs.

The inconspicuousness was part of the attraction, said Jasmin Arneja, 42, who bought the two-bedroom house with her husband Gagan, 40, a software engineer at a networking start-up. "It's the antithesis to these outrageous bizarre Gordon Gekko-esque houses. It just incorporates so much of our values," said Ms. Arneja, who runs a philanthropic advisory firm.
Housing prices in the San Francisco Bay area are once again soaring, thanks to an infusion of cash from the rising shares of Apple and Google and the initial public offerings by Zynga, LinkedIn, Yelp and soon Facebook, expected to be the largest in Internet history. But while a previous generation of dot-com executives opted for mansions in wealthy San Francisco neighborhoods like Pacific Heights and tony Silicon Valley suburbs like Atherton, this generation is gravitating to modest homes and condos in grittier parts of the city.
Ground zero of the current tech-fueled real-estate boom is the Mission, formerly a majority Hispanic neighborhood on the southern edge of San Francisco that's close to the main arteries that link San Francisco to Silicon Valley. Median home prices in the Mission grew 44% in December compared with a year earlier. Adjacent Noe Valley had a rise of 31% over that same period, according to the San Francisco Association of Realtors. The average number of days homes sat on the market in both neighborhoods has almost halved over the past year.
That's in sharp contrast to what's happening nationally, where the housing market continues to flounder, with the Case-Shiller 20-City index down for the fourth straight month in a row. It's even an aberration from the San Francisco area (including Oakland), which saw a 5.4% drop in home prices in December from a year earlier.

The Mission apartment building where investor Michael Barton bought a condo: 'You can tell there is an upsurge going on here.'

Stephanie Pocino, 28, makes the 45-minute trip to Facebook every day from her rented apartment building in the Mission. She has no garbage disposal and no dishwasher, but the Victorian building has lots of charm and bay windows. She carries a wireless Internet card, which she uses to answer emails and work on presentations while on the commute, and her laundry, which she gets done free at the company's headquarters.
Soaring rental prices—up more than 10% in the Mission and Noe Valley in the past six months alone—are also making buying more competitive, said Vanguard Properties broker Craig Waddle. He's seen bidding competitions for rentals and rental offers coming in higher than the asking prices. At an open house for a one-bedroom offered for $1,400 a month, 40 people were filling out applications on the spot. One person walked up to the owner, offered $1,700 and got the place.
"It's been kind of shocking," said Raj Gajwani, 36, who has been looking for a house in Noe Valley for around $1.5 million for the past few months. A founder of two online companies, he and his wife are expecting twins and want a house close to a shuttle-bus stop for his wife's commute but with "culture, interesting people and activities." They also want something they will be able to sell for more money in five years, when they might have to move to the suburbs for better schools.
Mike Shaw, a real-estate agent who has worked for 15 years in the San Francisco market, said buyers often want something already renovated or vintage because they don't have the time or the interest to hire designers and architects. "That person in jeans and a sweatshirt could be low on the totem pole or a multibillionaire. They haven't realized the value of good design either in architecture or fashion," said Suzanne Tucker, a San Francisco designer who has remodeled many of the most lavish homes in the Bay Area.
Buyers argue they have a different sensibility. Ms. Arneja, who snagged the sought-after house in Noe Valley, said she was drawn to the interior, which is covered almost entirely by dark redwood and brick, lending it a feel that lands somewhere between a den and a tree house. "This is clearly a '70s house," said Ms. Arneja. "I would like to think of it as a shining example of good architecture during a bad period of design."
Pop-up restaurants with long lines, coffee shops that brew one cup at a time and shops selling curiosities like local honey have followed the influx of cash. Apple employee Amandeep Jawa, who takes the company bus to work, covered the driveway of his Victorian with a "parklet," a public space registered with the city featuring seating and greenery. His crowning achievement: a topiary triceratops, dubbed Trixie, made of succulent plants.
But the gentrification is far from complete. A surge in violence between feuding gangs called the Norteños and Sureños claimed two lives in less than 24 hours in the Mission in August, and there was a shooting in front of a coffee shop. Noe Valley saw a rash of sexual assaults; residents there have also reported attempted carjackings and armed robberies.
"The key word is coexistence," said David Campos, a member of the city's Board of Supervisors representing the Mission and Bernal Heights.
Blogs popular with tech workers keep track of the violence, and one UC Berkeley student produced a map called "Gangs and Cupcakes," which overlaid Norteño and Sureño territory with the Mission's most popular cupcake cafes. In recent years, somebody spray-painted "cafe gentrification" on the sidewalk in front of popular coffee shops.
The high prices and the changes in the neighborhood are only going to intensify, predicted Lawrence Coburn, 42, who first moved to the Mission in 1999 to found a start-up and has lived in an 1,100-foot rental loft there since 2003. "A lot of my friends are trying to hustle to buy a place before all the Facebook people get liquid," he said.
Investor Michael Barton, 48, recently decided to buy because he wanted to lock in his investment before Facebook's IPO money hits town. The area around his 950-square-foot, two-story loft is "kind of funky, and gritty and dodgy," said Mr. Barton. But an industrial building next door has been taken over by Internet start-ups. "You can tell there is an upsurge going on here," he said.

A version of this article appeared Mar. 16, 2012, on page D1 in some U.S. editions of The Wall Street Journal, with the headline: The Hot Spot for the Rising Tech Generation.

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Is It the Price of Your Home or the Price of Your Happiness?

Posted By Steve Harney On February 28, 2012 @ 7:00 am In For Sellers,Pricing | 7 Comments

Our founder, Steve Harney, occasionally asks to do a personal post on what he sees as important to our industry. Today is one of those days.  – The KCM Crew
I recently gave a presentation about the current real estate market to a group of home sellers in a city in the Northeast.  That night, I explained to them that home values in their area were about to be negatively impacted by a surge of distressed properties entering their region over the next year. As I have often found to be the case, the homeowners were very receptive; many felt that they now had the information they needed to make a good decision with regard to pricing their home to sell in this market.
After the class that night, several of the homeowners came up to me to privately discuss their personal situations. One of these owners said something I will never forget. He shared with me that he had come to a revelation that night.
This particular homeowner had put his home on the market with plans to move to Florida, where his daughter and his infant grandson live. He missed his daughter very much and missed his grandson even more. He hated every passing day that he wasn’t able to “hold the baby in my arms and rock him to sleep”.  That night at the seminar, he thanked me for reminding him of the reason he put his home on the market in the first place – he needed to rejoin his family. I was struck by the wisdom of his final words to me before he turned to walk away.

“I thought I was putting a price on my home. While I hold out– hoping to get a few more dollars, I am actually putting a value on my happiness.”

He adjusted his asking price that night and sold it three days later. Very soon, he will be able to rock his grandson to sleep in his arms, both of them happy and content.


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