Why This Cycle Is Different For Oakland Multifamily
Developing in Oakland is a point of pride for St. Regis Properties Director of Development Sam Remcho. While the Oakland native started his career as a broker, he always wanted to develop and loved the idea of working with land and construction. He teamed up with St. Regis Properties Chairman John Allen and President Nick Allen in 2012. The family-owned Bay Area-based business has since made strides to build more housing in Oakland and throughout the country.
“We like Oakland because of the people, the open space, the ease of transportation, the great weather, the employment opportunities and the overall quality of life,” Remcho said.
St. Regis Properties is part of a growing group of developers building housing in Oakland. With housing projects becoming too difficult to pencil and more red tape in San Francisco, developers are preferring to build housing in the East Bay, where the housing need and demand is just as high. Large employers also are moving into Oakland and the East Bay, where many of their employees live.
Oakland has shed its label of being a secondary market to San Francisco, and developers are recognizing it as a market unto itself.
“Oakland has its own culture and own attraction,” Remcho said. “You can do everything you want here. There is fine dining and entertainment.”
Housing is in high demand in Oakland as well and new projects are leasing up quickly. St. Regis Properties has three projects in the works and one completed project. Its first Oakland project, Idora, a JV with Signature Development in the Temescal neighborhood, is nearly leased up since it was completed in April. The 33-unit apartment complex includes 2,400 SF of retail, which could be filled in part by a restaurant, according to Remcho. The transit-oriented complex at 5239 Claremont Ave. is a mix of one- and two-bedroom units.
The developer has fast become a part of the city’s downtown resurgence. St. Regis Properties began construction on a parking lot at Eighth and Broadway in 2016 and will turn the site into a 50-unit apartment complex with 4K SF of ground-floor retail.
The five-story market-rate complex will have one- and two-bedroom units with two townhome units tucked in the back of a courtyard. A roof deck will offer games and entertainment, barbecues and fire pits as well as views of Downtown Oakland and the Oakland Hills. It also is three blocks from the 12th Street BART station.
“Everything is right there,” Remcho said. “It has culture and transit and the Downtown Oakland office component too. It is just a very well-located project.”
The developer is working through entitlements for a 58-unit project on Fallon Street near Laney College. The project, designed by Lowney Architecture, would have a mix of studios, and one- and two-bedroom market-rate apartments. Amenities include a fitness center and an indoor/outdoor seventh-floor terrace with views of Lake Merritt, barbecues and an open air canopy. The project will offer bike storage and a mechanical parking system from CityLift.
Remcho had his eyes on 412 Madison for years and often visited the area near where his mother lived. He started talking to the landowner years ago and built a good relationship. He saw the site as ideal for a tower with views of Oakland Hills and the bay.
Jack London Square has been a desirable place for development with its waterfront and retail and restaurants, but sites are limited. Buildings in that area are historic and are often harder to redevelop. Even with its waterfront setting, it has been very slow to develop. The area has not yet been built up much for the same reasons Oakland has not had a lot of development.
“The last few development booms Oakland was left behind or caught on so late in the cycle it didn’t have much to show for it," Remcho said.
Why It’s Becoming Easier To Develop In Oakland
With thousands of units in the pipeline in the city, Oakland is becoming a huge part of the current wave of development in the Bay Area.
“I haven’t seen this type of momentum in Oakland in my career,” Remcho said.
The city’s planning department has been accommodating to developers and great to work with, according to Remcho.
“Oakland is excited,” Remcho said. “A lot of [the planning staff] have been with the city for a while and they haven’t had this kind of excitement.”
Getting financing has become a little bit easier in Oakland as well, but lenders remain cautious. Before the current development boom, lenders did not have projects to compare, which made financing difficult, according to Remcho. Now they have new product, rental information and market data to make better estimations. Large institutional capital and some national developers have entered the Oakland market. Blackstone and CityView are working on a project on Broadway, for example.
“Oakland has become a very solid core market,” Remcho said.
Financing has changed not just in Oakland, but for any project as lenders become more cautious later in the cycle. Previously, developers could come in with 25% or 30% equity, but now they need 35% to 45% equity. Developers like St. Regis Properties are getting more creative and teaming up with strategic partners or other investors to help fill in the gaps.
Why It’s Becoming More Challenging To Develop In Oakland
Along with challenging financing, the cost of construction and labor also has been on the minds of the developers like St. Regis Properties. Remcho said the developer will pay to keep quality subcontractors who do a good job and are reliable.
Impact fees, which go toward affordable housing and infrastructure projects, are expected to increase $2,400/unit in July. While Remcho said St. Regis Properties is happy to pay these fees as a way to give back to the community, they also add to the price of development. Developers also are increasing security efforts at construction sites following a spate of fires in Oakland and Emeryville.
While developers build on vacant or underused land, they are fast running out of available land in Downtown Oakland.
“It’s a challenge to find quality sites with realistic expectations from sellers,” Remcho said.
These challenges certainly are not deterring St. Regis Properties from wanting to develop more in Oakland. Remcho said the developer will need to be more creative in site selection and is eyeing sites not widely targeted, such as places in East Oakland and sites east of downtown.
“You’ll see more of us,” he said.