California Super-Commuters Are Transforming Sleepy Suburbs Into Busy Metros
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When Michele Nissen first moved from Los Angeles to Eastvale, a city in Riverside County that borders Orange and Los Angeles counties, she remembers her car running out of gas twice because there wasn’t a gas station in what was then an unincorporated part of the county.
In the morning, she would wake up to the clanking of cows at the feed gate.
“There were cows everywhere,” said Nissen, who moved to the area from Palos Verdes in the early 2000s. “There were thousands of cows. They were on every lot. There was a lot of dirt and flies. It was a very rural community.”
She remembers her parents visiting.
“They asked me, ‘What have you done?’” she recalls, laughing.
But times have changed in this farm town that sits about an hour drive away from downtown Los Angeles.
Many dairy farmers sold their land to residential and commercial developers. People from nearby Los Angeles, Orange and other parts of Riverside County began to flock to Eastvale. Its population grew by 20% from 2011 to 2018.
Retail and restaurant businesses followed, opening around 2002 or 2003. First, a shopping center, then a Vons and a Home Depot.
“Affordability continues to be either the No. 1 or No. 2 driver of why people are coming here,” said Nissen, who is now Eastvale’s city manager. “We are very strategically located. There are a lot of transplants that are commuting — keeping their higher-paying jobs in Orange or Los Angeles County and coming home here.”
As more people move farther away from expensive California metros, suburban communities like Eastvale are evolving to accommodate the additional growth. But this growth comes with a price. Residents are commuting longer to their jobs and cities are struggling to keep up with housing demand and job growth. These outlying cities are starting to transform, offering an opportunity outside California’s expensive cities as places to live, shop and, to a growing extent, work. This shift is reshaping California’s suburbs.
More Affordability Draws Residents
Northern California is experiencing a similar migration. For people who try to remain in more-expensive Bay Area cities, multiple families are crowding into a single-family home and younger people are sharing two-bedroom units with four or five other people, Bay Area Council Senior Vice President of Government Relations Matt Regan said.
San Francisco rents averaged $3,558 as of March. Although rents have declined about 12% since a peak of $4,040 in April 2016, rents are 45% higher than January 2011, according to data from Rent Jungle. San Francisco home prices continue to break records and reached $1.6M during the first quarter.
Many Bay Area residents are heading east into Sacramento, Stockton, Tracy and Lathrop, areas that have posted growth in housing and population in the last decade. In San Joaquin County, which includes Tracy, Stockton and Lathrop, the number of housing units increased 4% to 243,420 as of January compared to 233,755 in 2010, according to the State of California Department of Finance. During this time, the number of multifamily units in complexes with five or more units increased by about 3% in the county.
In Eastvale, the average rent is $1,581, according to RentCafé. Meanwhile, Los Angeles' average rent is nearly $2,300. A median home price is $779K in LA. In Eastvale, homes are being listed for $569K. The number of housing units increased 15% in Eastvale from 2011 to 2018.
Sometimes it is the lure of homeownership that draws residents out of cities where they would never be able to afford to buy. In Ontario in San Bernardino County, millennials are bucking the perception that they wish to remain apartment renters to purchase homes in Brookfield Residential’s New Haven 1,000-home, mixed-use master-planned community, Brookfield’s Vice President of Southern California Housing John O’Brien said.
“We’ve found the under-40 demographic makes up more than 80% of our homebuyers,” O’Brien said, adding that the homes range in price from $300K to $600K. “We were initially surprised, but it just goes to show that if you offer people a home at an affordable price, they’ll buy.”
Longer commutes are the price of homeownership in expensive Southern California, according to the Realtors Property Resource, a database from the National Association of Realtors.
“[In Eastvale] the cost of affordable new housing comes at the expense of one of the longest commutes to work, over 30 minutes average, including a disproportionate number (34.5%) commuting across county lines,” according to the Realtors Property Resource recent Commercial Trade Area Report.
Rise of the Super-Commuters
With residents moving out of major cities but keeping their jobs in those cities, there has been a growth in the number of super-commuters in California. (Super-commuters are those who travel 90 minutes or more to get to work.) Nationwide, the number of super-commuters grew 30% to 4 million from 2005 to 2016.
The bulk of super-commuters into the Bay Area come from Stockton. As of 2016, about 10% of Stockton’s commuters were super-commuters, according to the East Bay Times. Over 28,000 people commute up to 80 miles or more from Stockton into the Bay Area. One Stockton woman wakes up at 2:15 a.m. to catch two trains that will get her to her job at the U.S. Department of Health and Human Services in San Francisco by 7 a.m. In Southern California, over 127,000 super-commuters drive from Riverside into Los Angeles for work and make up 7.3% of Riverside’s commuters.
Traffic into job centers has gotten worse. About 625,000 vehicles commute into the inner Bay Area every day, Regan said. Most of these vehicles enter from the Interstate 80 and 580 corridors from the North Central Valley and Sacramento areas.
“People drive from all points east to get to jobs in San Francisco, Palo Alto and Cupertino, clogging up freeways and roads,” Regan said.
As of June 2017, there has been one housing unit built for every 4.3 jobs in the Bay Area created since 2011, according to the Building Industry Association.
Building homes near jobs would reduce traffic and take cars off the road, but many communities have opposed new developments, believing more housing would increase traffic in their neighborhoods, Regan said.
The Urbanizing Suburbs
As more residents head to the suburbs, so have developers. In Concord, 854 housing units worth about $150M are in the works and a major retail project is nearing completion. The city is in the midst of planning a 25- to 30-year build-out of the 5,000-acre Concord Naval Weapons Station. The redevelopment, at an estimated total cost of $6B, would add 12,000 housing units, 6.5M SF of office and 28,000 jobs.
City of Concord Business Development Manager Brian Nunnally said Concord’s urban core is appealing to young professionals and millennials because of its accessibility to BART, live music venue at the Concord Pavilion and various fitness and recreation opportunities.
“There are the same opportunities out here without the hassle, without the parking problems and without the daily grind of larger cities,” Nunnally said. “There is no reason they have to go to Oakland and San Francisco.”
Large employers have added or renewed long-term leases in Concord. Nunnally said one out of eight jobs in Contra Costa County is in Concord, and employees benefit from a reverse commute as well as mass-transit options. Wells Fargo opened an office in Downtown Concord in 2017. The 185K SF office accommodates 2,200 employees. Cerus, a blood transfusion safety company, and Homebridge Financial Services leased a total of 70K SF in March at 1200 Concord, owned by Sierra Pacific Properties. Cerus signed an 11-year lease for about 65K SF, while Homebridge signed a 3,600 SF lease.
Concord benefits from access to all levels of housing. The city has some of the most affordable single-family homes in East Contra Costa County as well as access to luxury housing in Danville/Alamo and LaMorinda, said Newmark Knight Frank Executive Managing Director Breck Lutz, who along with Senior Managing Director Alex Grell represent the landlords at 1200 Concord.
The entire East Bay has benefited from increased investor interest that has followed growth. Office investment volume for the East Bay was about $1.4B in 2017, according to data from Cushman & Wakefield. Volume peaked at $2.2B in 2016, but was about $1.4B in 2014 and 2015. Comparatively, sales volume was over $306M in 2011. Multifamily sales volume has fluctuated throughout the current cycle, but typically been above $1B for most of the cycle. In 2017, investors traded about $1B in multifamily assets compared to $1.3B in 2016.
In Contra Costa County, recent notable transactions include Harbert Management Corp. buying Corporate Center at 1320 and 1390 Willow Pass Road in Concord for over $63M ($184/SF) from PGIM Real Estate. Rockwood Capital bought the 195K SF Growers Square in Walnut Creek for $98M ($501/SF) during the first quarter. DivcoWest has put its nearly 600K SF two-building complex at 2000 and 2001 Clayton Road in Concord on the market, according to Cushman & Wakefield. DivcoWest originally bought the property in 2012 for $94M.
“The Concord office market really is a market that can satisfy all needs of every different type of tenant from every different type of industry,” Lutz said.
Multifamily developers have been flocking to Concord’s downtown area, and vacant lots around the downtown Concord BART station are a hot commodity, Nunnally said.
Many retailers are expanding into the Bay Area through Concord. The Bay Area’s first Whole Foods 365 opened in Concord in 2017 and the region’s first Dunkin’ concept store is headed to the city. Korean barbecue chain Mom’s Touch opened its first U.S. location in downtown Concord in January.
In Alameda County, Livermore has several projects in the works, including a new 115K SF retail center. JEMCOR Development Partners broke ground in March on a 171-unit project with 35 permanently affordable units for low-income families earning up to 50% of the area median income.
Demand for housing in Livermore has been strong and rents are nearly as much as nearby Pleasanton or Dublin, two areas also experiencing growth in housing.
“People keep getting priced out of the main ... Bay Area locations and, as a result, are forced to move farther out,” JEMCOR President Jonathan Emami said. “The lack of new supply for all income levels is moving people where they can afford.”
Even with opportunities in many outlying Bay Area cities, development is becoming more difficult due to rising construction costs and increased opposition to new development from existing communities.
“There is a lot of red tape and hurdles that prevent more housing from being built or coming online faster to meet the demand,” Emami said. “The demand is so strong for housing that the new construction supply cannot keep up the pace.”
He said one area not being served is workforce housing. Many of the projects getting built are luxury and affordable housing. The affordable housing targets extremely low income or specific populations in need of specialized services.
“There is a lot more catching up to be done for low- and moderate income populations,” he said.
'Cow Town' Transformation Continues
Known as an industrial hub, Riverside County has benefited not only from the surge of e-commerce but the influx of new residents. In the city of Riverside, developers have been filing more single-family and multifamily construction.
In the first half of 2017, there were 383 new residential permits issued in the city of Riverside, of which 287 permits were for multifamily units and 96 permits were for single-family homes.
By comparison, only 108 new permits were issued in the first half of 2016, all of which were for single-family homes, according to the January 2018 Riverside Regional Intelligence Report by UC Riverside School of Business.
Office space is also in demand, where the average rent has increased by 0.5% to $23.19 per square foot. In the first three quarters of 2017, office building permit values reached over $7.1M, compared to just $20K in the first three quarters of 2016.
“The growth in office space has benefited the growing local professional employment base and provided a boost to local construction employment,” stated the report.
Because of its proximity to Orange and Los Angeles counties, Eastvale in Riverside County has quickly blossomed.
For years, Nissen, Eastvale’s city manager, and other officials lobbied Costco to open in the city. But they were always rebuffed by company officials, she said. Now Costco, seeing the growth of Eastvale and other surrounding cities, is slated to open a 150K SF store in the city later this year. The Costco will anchor the $366M, 205-acre mixed-use Goodman Commerce Center that includes a hotel, a modern logistics space, restaurants and more commercial retail developments, Nissen said.
The sales from Costco are expected to generate $1M in sales tax that go straight to the city’s general fund. More commercial projects are lined up, including an In-N-Out, she said.
Leonard Mercado, 45, has lived in Eastvale for about seven years. A partner at real estate agency and mortgage firm McLeod & Associates, Mercado said he and his wife, Mia McLeod, 35, chose Eastvale because of the city’s growth potential.
“When we first moved here, our friends were asking us ‘why you are moving to a cow town?’” Mercado said. “But we started placing a lot of clients here because of its affordability and huge lot sizes and my wife and I just said, ‘Why not?’ It’s a great place to invest and live in. We truly love it here because of the small community feel. It's like everyone pretty much knows each other.”
He, his wife and many of the families that he helped find homes in Eastvale are commuters. Many are driving two hours or more a day round trip for work, usually somewhere in Los Angeles or Orange counties, he said. Mercado and his wife drive about 35 minutes to Walnut, where McLeod & Associates is headquartered.
Despite the long drive, Mercado loves the community and with all of the new development coming in, is bullish on the area.
Nissen said residents are aiming for one thing.
“They want the American dream,” she said.
CORRECTION, MAY 10, 11:42 A.M. PT: A previous version of this story had incorrect names for Sierra Pacific Properties, which owns 1200 Concord, and Cerus, a blood transfusion safety company. The story has been updated.