Boston Properties is not only buying 535 Mission St., the fenced-in lot between the Salt House restaurant and 555 Mission St. but they are going spec…
We keep hearing from analysts how hot the Silicon Valley Office Market is but is it really hot? We respectfully disagree. The 680,000 square foot Samsung building will replace the 200,000 current building at First and Tasman in San Jose. The Facebook Office expansion in Menlo Park and Apple’s new campus is Cupertino not withstanding we see a trend of companies moving from the Valley for San Francisco and even Oakland. The Burlingame office market is depressed and we forecast this trend to increase to the South Bay.
Congratulations to our friend Eric Tao. Avant Housing and equity partner Essex Property Trust have been tapped to build a 400-foot tower on Block 9 in the Transbay District, a 563-unit project that could break ground a year from now. The site is next to the Metropolitan Residential Condos (across the street from the Red Brick Warehouse as the caption picture shows). The Avant/Essex team agreed to pay $43.32 million for the site, which works out to about $100,000 per door for the project’s 420 market-rate rental units. The project also includes 143 units of below-market-rate family units, which are being developed by Bridge Housing. Eric said that the project will cost between $250 million and $300 million to build, depending on what happens to construction materials over the next year.Block 9 is one of 11 parcels (a total of 12 acres) that were freed up when the Embarcadero Freeway was torn down. Proceeds from the sale of the properties to private developers will help pay for the Transbay Terminal, the $4.2 billion “Grand Central Station of the West” under construction at First and Mission streets.
San Francisco’s Museum of Modern Art has leaked a few more details of its extensive $555 million makeover plan. New details for the additional 235,000-sqaure-feet of space reveal that SFMOMA is committed to becoming more integrated with the neighborhood by offering more art viewing space that’s free to the public and an increased number of flexile galleries for live performances and large-scale art pieces. It’s also planning a more robust education program for kids.The new building, designed by Snøhetta, will boast seven levels of exhibit and programming space and 130,000 square feet of indoor and outdoor gallery space.That will include a garden and sculpture terrace on the third floor — claiming to be the biggest public living wall of native plants in the city — and a “white box” space on the fourth floor with what sounds like an innovative lighting and sound system for live art, film screenings and special events.Meanwhile, the seventh and eight floors will have conservations studios and a new outdoor terrace that plays off SFMOMA’s current rooftop sculpture garden.On the ground floor, the museum seems to be doing everything it can to increase access and be more inviting for pedestrians passing by. There will be additional public entrances on Howard and Minna Streets and a street-level pedestrian promenade offering a pathway between SFMOMA and the Transbay Transit Center, which is now under construction.he ground floor facing Howard St. will also have 25-foot-high glass walls allowing for art displays that the public can view from the outside. For now, art planned for the space includes Richard Serra’s towering walk-in spiral sculpture. This space will also have seating for guests or groups.The museum will close this summer for renovations and reopen in 2016.
On February 15, StreetsBlog.org had a great feature on Congestion Pricing and we do believe congestion pricing should be adopted ASAP in SF. London adopted congestion pricing 10 years ago and the results are fantastic. In London, Cars and trucks pay £10 (roughly $15.60) to drive into or within the charging zone between 7 am and 6 pm on weekdays. The zone is London’s Commercial and Financial hub and, at 8 square miles, rivals Manhattan’s 8.5-square mile Central Business District. Taxis are exempt, as are qualifying low-emission vehicles. Cars registered to zone residents, who account for 2 percent of Greater London’s 7 million people, pay one-tenth the standard charge.London’s system deploys 1,360 closed-circuit cameras at 348 sites within the charging zone and on its boundaries to record the license plates of vehicles entering and moving within the zone. The plates are continuously matched against a database of monthly accounts, and “spot” payments are made via Internet or at kiosks, drawing down accounts or billing license-plate holders. This cumbersome system arose not only from the absence in the U.K. of electronic toll collection systems such as E-ZPass when the system was launched a decade ago, but also from the decision to charge for car trips entirely within the zone in addition to vehicle entries. A byproduct is the relatively meager net revenue available for transport improvements.In its first few years, the London charging scheme was a solid traffic buster with 15-20 percent boosts in auto and bus speeds and 30 percent reductions in congestion delays. Most of those gains appear to have disappeared in recent years, however. Transport for London (TfL), which combines the functions of our NYCDOT and MTA and which created and operates the charging system, attributes the fallback in speeds to other changes in the streetscape and traffic management:TfL established that the primary reason for the continued reductions to traffic speed, which would otherwise have been unexpected given falling traffic levels, was a substantial increase in interventions that reduced the effective capacity of the road network for general traffic. These interventions ranged widely, including policies to increase road safety, improve the urban realm, and prioritise public transport, pedestrian and cycle traffic, as well as a large-scale increase in road works by utilities and general development activity. Without those “interventions,” which include extensive Olympics-related works, travel speeds likely would be a good deal higher than before the congestion charge. In any event, London isenjoying improved travel choice, access, dependability and safety, as my Congressmember friend observed.
- The London Underground runs 5 percent more train-miles on the Tube, and traveler delays are down around one-third, versus a decade ago
- Bus usage reached a 50-year high in 2011, with 30 percent more service and 20 percent less waiting compared to 2000-01
- Bike trips increased 79 percent from 2001 to 2011, after having stagnated between 1993 and 2001
- Travel fatalities and serious injuries were the lowest on record in 2011 although cycling casualties have risen in recent years, perhaps owing to increased cycling
The bus service gains stem from bus fleet expansion and provision of bus lanes, the former financed by congestion charge revenues, the latter enabled by the initial reductions in auto traffic attributable to the charge itself. Here’s how an FHWA team of experts summed up London’s congestion revenues and expenditures for one recent year (2008): Revenues from the congestion charge were £268 million (US$435 million) in 2008. When accounting for expenses (about 50 percent), the congestion charge generated about £137 million (US$222 million) in the same year, which by law must be spent on transportation in greater London. Of the 2008 net revenues, 82 percent went for bus improvements, 9 percent for roads and bridges, and the remaining 9 percent for road safety, pedestrian and cycling facilities, borough plans, and environmental improvements.
On February 15, the Registry reported that as technology companies drive commercial real estate leasing in San Francisco, unprecedented demand from tech workers is compelling the for-sale condominium market. Forty percent of the new-condo buyers that his company is seeing are employed by the technology industry, said Alan Mark of The Mark Co. Traditionally those in the financial sector represented the largest class of purchasers. Yet condo developers are not producing inventory. At the height of the late-great housing boom as 2007 closed, condo developers were offering 3,000 units for sale in the city. Since then, the number of available units has fallen in a nearly straight line. Today that figure is 212—and more than half, 108, are already under contract to sell. Fewer than 400 condominiums are under construction today, according to Mark company data, even though nearly 5,000 more condominiums have been approved.Yet, the city’s construction pipeline is made up almost entirely of apartments—3,700 in all are under construction today—and San Francisco apartment rents have been flat for three quarters.That condo developers have not stepped up to increase production in the city has surprised him, said John “Jack” Robertson, vice president of development for the Bay Area Division of Lennar Urban. “Bosa Development is an exception at the Madrone Mission Bay, he said. They “took the risk and seemed to have hit a home run.” The 329-unit development, which began construction in February 2011, has sold out.Lennar Urban is the development force behind San Francisco’s Shipyard and Candlestick Point on the city’s southeast bay waterfront. The redevelopment, including the demolition of the football stadium, contemplates 12,000 new homes, 3.15 million square feet of office and research and development space, nearly a million square feet of retail, a hotel and community facilities.Lennar is taking offers now from developers for the first lots, Robertson said. It will be up to each of them to decide whether to build rental or for-sale housing. “We really regret not begin able to start construction 24 months ago at either of these master-planned communities when we would have been entering a market with no inventory to compete against,” he said. The for-sale housing market in San Francisco recovered “like a boomerang,” said Rick Holliday of Oakland’s Holliday Development. in the southeast quadrant.
A New York City-based real estate investor with a history of ownership in the region plans to invest as much as $250 million in equity in trophy San Francisco properties.The Pennsylvania Public School Employees’ Retirement System has approved a commitment of up to $100 million for Paramount Group Real Estate Fund VII. Paramount plans a total equity raise of $600 million to $1 billion and is looking to invest up to 25 percent each in San Francisco and Washington, D.C., with the remainder in New York City, according to a document from the Pennsylvania retirement system. The overall investment strategy for Fund VII is to invest in trophy office buildings that have property-specific issues that Paramount can effectively manage to generate value-add returns. The investor projects a net internal rate of return for investors in the commingled fund of 10 percent to 14 percent and a doubling of equity. There will be 60 percent debt placed on the commingled fund.The pension fund stated in a board document that Paramount focuses on these markets due to lower vacancy rates, higher rental rates and resiliency. The investor also believes that these markets can be volatile, which creates opportunity for experienced operators. It expects the mismatch between maturing real estate debt and the amount of financing available in the next several years to generate good chances to buy well. The only asset Paramount owns in the San Francisco market now is the 1.6 million square foot One Market Plaza office building where it also has a regional office.Paramount has a nationwide office-building portfolio valued at $10 billion, according to a pension-fund document. The fund manager sold $4.5 billion of its portfolio in 2006 and 2007 when it believed investors were overpaying for properties. Paramount employs 210 people.
We are big fans of Go Daddy.com which plans to double its employee count in Sunnyvale to 80 by yearend and expects to add even more workers in 2014 as the Scottsdale, Arizona, company claims Silicon Valley as its new “tech hub.” Even as Go Daddy christened its 8,160-square-foot downtown Sunnyvale offices Feb. 11, the company’s chief executive said it had acquired the valley’s M.dot Inc. and has already begun searching for additional office space.The new Sunnyvale location also houses workers from Outright.com, a cloud-based financial-management application company that Go Daddy acquired in July of 2012. Outright, which was located in Mountain View, had 200,000 small-business customers at the time of its purchase.The new Go Daddy offices, on the ground floor of the Sunnyvale City Center, join a growing cluster of high-profile high-tech companies locating in the central Silicon Valley town, in this case near Sunnyvale’s rapidly evolving Town Center, adjacent to a Caltrain station.Apple Inc. and Nokia Inc. each have leased a full office building of 156,000 square feet at the Sunnyvale Town Center. Just outside of Go Daddy’s front doors, San Francisco’s BRE Properties and Carmel Partners are building hundreds of apartments. An existing Target and Macy’s anchor an expanding retail cluster. More than a dozen homegrown restaurants line the town’s traditional downtown core, South Murphy Avenue, two blocks away. Go Daddy employees live both in the apartments nearby and commute from San Francisco. A mile away, huge earth moving equipment and workers in hard hats navigate around huge piles of construction debris including jagged concrete pieces and tangled rebar. LinkedIn Corp. has cleared a huge site of multiple commercial buildings at West Maude and North Mathilda avenues and is buildings its new corporate headquarters campus. Down the street, the steel beams of a curved midrise building replacing an old U.S. Post Office have been formed to house another operation for Apple Inc.
Our friend Hamid Moghadam’s Prologis has acquired a more than 1,200-acre parcel in the city of Tracy at the foot of the Altamont Pass.The acquisition comes on the heels of the Prologis announcement that it would build a more than one million square-foot fulfillment center for Amazon.com in Tracy. But Prologis Northwest Region President Scott Lamson said there is no cause and effect or relationship between the two transactions other than his company’s abiding interest in doing business in the East Bay town.The Prologis acquisition is part of the well-known Cordes Ranch and is contiguous to the Patterson Pass Business Park, which Prologis developed along Interstate 580. The Cordes Ranch property, which fronts Interstate 205, is not expected to be fully entitled until August. It should render 1,040 acres of developable land once roads and other infrastructure are complete. The purchase is also significant for what it signifies within Prologis, which is distilling its land portfolio. The company recently completed an analysis of its land holdings and has concluded that it should sell $200 million worth while keeping tracts valued at $1.7 billion, its chief financial officer, Thomas Olinger, told analysts on the call. So even as it is culling elsewhere, it is buying in Tracy.
As mentioned above, we think that contrary to what you hear, the trend in Commercial Real Estate will be away from the Valley and in the direction of SF, Oakland and Emeryville, California. Emeryville is now close to completing one of the country’s most extensive, robust, and massive broadband fiber backbones. By employing a private partnership, Emeryville has also created an Open Access fiber network that actually offers a wider choice of internet providers at a reasonable cost. Dubbed “EmeryConnect, the new system developed by PAXIO, Inc., offers a huge broadband capacity for both businesses and residential users throughout the City.Four points of presence (POPs) in Emeryville already deliver two terabytes of broadband capacity on high-speed fiber to businesses such as Pixar Animation Studios, Novartis, Bayer HealthCare, Lawrence Berkeley National Laboratories, Clif Bar, Peets, Whole Foods, Ex’Pression College, and scores of retailers at its new Bay Street retail center among others.Two terabytes of speed means that a single Emeryville user could download all the books in United States’ Library of Congress or 3,000 high definition movies in just about one minute. The City is perhaps best known as being the home of Pixar Animation Studios, but has long had a reputation as a regional center for artists and artisans. Emeryville has also become a center in the East Bay for retail, hospitality, and commercial businesses. In addition to having several regional retail centers and major retailers (including fashion, furniture, house goods, and more), the City is home to several hotels, theatres and top-notch restaurants. In addition, major corporations, such as Novartis, Bayer, State Farm Insurance, and Leapfrog, in addition to Pixar have made Emeryville their home. Emeryville prides itself on being at the center of bio-technology and is home to several cutting edge innovators, including the Joint BioEnergy Institute (JBEI), part of the U.S. Department of Energy.The City is also a transportation hub, sitting at the crossroads of Highways I-80, I-580, and I-880. The City’s Amtrak Station is among the top 10 busiest in the nation, serving both intercontinental and intra-city (commuter) rail-lines. The City’s free Emery Go-Round shuttle carries riders from the MacArthur BART station and then throughout Emeryville and the City is home to several Flex-Car (car share) pods.