Where To Develop Next
Build Inc principal and managing director Lou Vasquez, speaking on our Residential Real Estate panel yesterday at Hotel Nikko, says most of his 2,500 units are in S.F. and in entitlement mode or about to start construction. He says it's important to look at the whole range of housing, whether it's affordable or "unaffordable," he laughs. He's got huge public components to Build's projects to improve surrounding streets. There's an advantage to having bought in 2008 to 2010, which makes 12-unit deals doable—now it's more about market risk.
Suffolk Construction Western region prez Andy Ball says this is Oakland's time to shine. His firm, which has loads of local residential projects underway, says trendy restaurants and farmers markets are popping up everywhere in the East Bay. Residents want to be close to transit and not use a car. What's holding it back is the fact construction costs are close to what they are at in S.F. He wonders at what point more people are going to move out of S.F.; possibly when rents get to $6/SF or it costs $1,500/SF for a condo.
AGI Capital prez Eric Tao is a big Uptown Oakland fan. But rents are still 35% lower than S.F., with construction costs almost the same. Until that gap closes, it will be difficult to get projects underway in Oakland, he says. Underwriting is still better in S.F., as expensive as it is. He jokes he's the only S.F. firm that does the reverse commute, doing happy hour out in Oakland (drinks are just as good, half the price, and the bartenders are actually happy to see you). He looks for projects near bars and restaurants; that's what urban dwellers want and it dictates rents they are willing to pay.
Signature Development Group SVP of development Paul Nieto says his Oakland-based development firm's got a bunch of projects underway, like Brooklyn Basin and the Hive in Oakland, an innovative mixed-use site with 104 apartment units atop an open air beer garden and tequila bar (choose from 150 kinds). Building enough affordable housing units is a challenging regional issue in all areas, he says. The local politics in many areas that have height limits that aren't optimal from a construction cost basis is a constraint on the amount of units developers can supply, including affordable units.
Panelists agree barriers to entry in the peninsula are higher than those in S.F. Eric, for instance, recently chased a deal in Burlingame but was outbid by someone who wanted to own land there. Heller Manus Architects CEO Clark Manus (left) moderated.