Why S.F.'s Top Developers Aren't Worried About a Downturn
There may be no market hotter on the West Coast than SoMa, with the cranes out in force. But as as pricing continues to shoot up, talk of the next big bubble is heating up. Here's what some of the city's top players had to say about it this morning at Bisnow's SoMa's Next Phase event at Hotel Nikko.
Hudson Pacific Properties SVP Drew Gordon (right, here with Allen Matkins partner Tony Natsis) says if California was its own country, interest rates would be a lot higher than they are today. But what he worries about most is lack of housing in the Bay Area. He thinks the biggest way to hurt a hot economy is not having enough places for people to live, or at least afford to live.
Tenants & Owners Development Corp CEO John Elberling says he's seen this movie before—it's his third office boom in S.F. He says we're still in startup and expansion mode and the next phase will be company consolidations and buyouts, which always follow rapid growth.
John (here with Boston Properties senior project manager Michael Tymoff and PAE Consulting Engineers principal Christian Agulles) says the market will inevitably stall, but the optimists are hoping for a soft landing—not a crash like last time. He says smart developers will ride it out, but overleveraged ones won't.
Breevast CEO Terry Crowley (right) says people will always want to invest, lease and live in S.F., which means he doesn't lose sleep worrying about the next downturn. For him, it's all about keeping an eye on liquidity and interest rates. Kilroy EVP Mike Sanford says if you buy good product that's well-located and you are capitalized conservatively, you can weather market fluctuations. He says Kilroy has a 30% debt-to-equity ratio. When there is a downturn, Mike says it'll be an opportunity for Kilroy to grow.
Stay tuned for more event coverage this week.