San Francisco Multifamily Development Booming
With cranes in the air and hefty demand for housing, San Francisco’s multifamily segment is thriving. Bisnow talked with CityView managing director Tony Cardoza and Equity Residential first VP of investments John Hyjer to find out what makes San Francisco ideal for multifamily development. Tony and John will be among the speakers at our upcoming San Francisco Multifamily Forum Oct. 13.
The Bay Area has demand from population and job growth. The plethora of educational, cultural and money centers add to the demand. Supply can sometimes be difficult due to geographic constraints, cost constraints and political constraints, but over the long term it can create additional value, he says.
“You have to be a real believer in the Bay Area,” says Tony. “The metrics are tighter than anywhere outside of New York.”
Tony says CityView is invested in seven projects in the Bay Area with 1,500 units to be delivered in 24 months. The projects are in Mountain View, Foster City, Menlo Park, San Jose, Union City and Oakland and are close to BART or near bridges. The firm has completed 16 developments totaling over 2,500 units during the last 48 months in California.
Equity Residential first VP of investments John Hyjer, above at Sundance, UT, says while inventories and deliveries are starting to catch up, demand remains high, especially with San Francisco having its highest-ever population of 850,000. Within the last five years, the city's added 45,000 people, but only 7,500 new units.
The lack of supply has led to Equity Residential’s new complexes, including Azure in Mission Bay, 340 Fremont on Rincon Hill and 1010 Potrero Hill, leasing up either quicker than projected or within their time frames. Equity Residential will soon deliver One Henry Adams and 855 Brannan into the Showplace Square neighborhood.
Even with such a hot leasing market, future developments have some tough challenges, including new laws and regulations. John says new municipal fees and requirements for affordable housing are too high. Since Prop C was passed, he says there’s been a 60% drop in proposed housing with many projects no longer making economic sense.
Pending rent control legislation “casts a shadow on current and future developments," John says.
Despite these challenges, “savvy developers that work with their communities to develop a project that works for all will find a few opportunities throughout the Bay Area," he says.
John says today’s developments are different than pre-recession projects. They are more amenity-rich with rooftop decks, pools, fitness and yoga centers, pet spas and open spaces.
Communities have higher-end finishes, such as above in the developer's 340 Fremont property, and complete tenant services. Projects have less parking due to modern technology and use of mass transit. Diversity with the types of units has also improved with more studios and one-bedrooms available.
Going forward there will be opportunities for redevelopment in established neighborhoods and assemblage opportunities for patient developers in pioneering neighborhoods, John says.
Due to a lack of developable large parcels and increased construction costs, his firm expects “more vertical development on appropriately sized parcels being the norm.”
Hear more from Tony, John and our other panelists at our San Francisco Multifamily Forum on Oct. 13 at The Fairmont Hotel San Francisco.