Housing Development Boom Hits Contra Costa County, But How Long Will It Last?
Despite Contra Costa County being a bit of an afterthought for investors and developers, a steady pipeline of new housing units has brought the county into a development boom. Ongoing demand for housing and accessibility to BART and other means of transportation has allowed people to live in a more affordable area while commuting to their jobs in urban cores.
For the first half of 2018, 904 units were completed in Contra Costa County, with over half of those units in San Ramon and Walnut Creek, according to CBRE’s San Francisco Bay Area Multifamily Q2 2018 report. Outside of North Alameda, which boasted 1,738 completed units, Contra Costa County is the only other area in the East Bay to have delivered completions in the first half of 2018.
“Because the overall job market in the greater Bay Area is at an all-time high and there is an enormous shortage of new housing to meet this demand, renters and first-time buyers are seeking more affordable housing alternatives in the cities and suburbs of Contra Costa County, where they are willing to commute by BART, company buses (e.g. Google bus), or by car to their employment,” Blake Griggs Properties co-founder and Managing Partner Brad Griggs said.
Griggs will be speaking at Bisnow’s Future of Contra Costa County event Nov. 7. The event will not only cover current and future multifamily trends in Contra Costa County, but also commercial projects under development in the county as well as transit-oriented development trends.
Housing Shortage Leading To Boom In The County
Housing demand has historically been driven by employment growth, but there are only a handful of large employment centers in Contra Costa County, Griggs said. Because overall job growth across the entire Bay Area has been at an all-time high, there has been an enormous shortage of new housing to meet demand, he said.
Renters and first-time homebuyers have turned toward Contra Costa County for more affordable housing alternatives and are willing to commute to employment centers, Griggs said.
“This trend has been building up since the end of the last recession and has driven up occupancies and rents of the existing housing supply in cities like Walnut Creek, Concord and Pleasant Hill … and financially allowed for new housing developments to occur in these cities,” he said.
Demographics also have shifted. Older millennials are moving out of city centers in exchange for homeownership and starting families, Griggs said. Walnut Creek, Concord and Pleasant Hill offer viable options for these buyers where they can own a home but still have a city-like experience nearby to connect with friends, he said.
These cities are close to BART and offer good schools, Griggs said. They also have city councils that are willing to work with developers to create growth solutions that help solve the housing crisis, he said.
The current cycle also has changed investor interest in the county. Historically, the county was more of a bedroom community with rents that didn’t really support higher-density housing developments, he said. Historic rent growth of existing communities wasn't seen as sustainable compared to other infill tech-centric markets in the Bay Area, Griggs said. Institutional investors largely stayed out of the county because they could get better returns in other Bay Area counties, he said.
“Certain submarkets in Contra Costa County are now behaving like other core infill counties around the Bay Area where demand for housing has been driven higher,” Griggs said. “As such, institutional investors now recognize that certain submarkets in Contra Costa County are sustainable markets for long-term investment.”
Blake Griggs has worked in Contra Costa County for over 20 years and currently has a pipeline of nearly 900 units near the Walnut Creek BART station and about 200 units in downtown Pleasant Hill. One project underway is Vaya, a 178-unit apartment complex developed for investor Northwest Mutual Life. It is leasing rapidly at 1800 Lacassie and is across the street from the Walnut Creek BART station.
Challenges Ahead For Bay Area Multifamily
Despite the increased development activity in the Bay Area, Griggs said the company’s expectation is that the real estate market will slow down next year for a few reasons. Significant increases to construction costs driven by a labor shortage and uncertainty about material costs related to trade issues and tariff discussions has caused many projects to be shelved.
A CALmatters.org report using U.S. Bureau of Labor Statistics data revealed that California and the Bay Area have about 70% of the construction workers that were employed during the peak of the last economic cycle.
Proposition 10, which would repeal rent control regulations under Costa-Hawkins, has led to almost all institutional investors staying away from infill transit-oriented investments in the state until the measure is voted on, Griggs said. These investors also won’t invest in communities that have rent control.
“This will freeze any new housing and will also cause apartment property owners to let their properties deteriorate by not putting capital improvements into them because they are not going to be paid back from these improvements,” Griggs said.
The process to get housing approved hasn’t improved much even after the state’s adoption of housing bills to expedite new housing, he said.
“This process needs to continue to be streamlined and to allow projects to proceed without a protracted approval process and frivolous CEQA lawsuits,” Griggs said. “In most cases it takes five to seven years from identifying a new property for development to occupying the finished project. At this pace, it will take decades to meet the housing demand and solve the housing crisis.”
Find out more about the future of multifamily from Griggs at Bisnow’s Future of Contra Costa County event Nov. 7 at the Walnut Creek Marriott.