11/19/2013

 

Here’s what happened in the SF Commercial and Residential Real Estate Market since 11/3:

 

128 units are proposed at Folsom and Raush which is right before 7th street near the Brainwash café/laundry. No information as to whether they will be  condos or apartments.

Pension Reserves Investment Management Board and Partner Divco West purchased 333 Bush St for  $270 million or $500 per square foot. 333 Bush St has 30 floors of office space, 13 floors of private residences and retail space at street level.

 

Visa signed a lease for 110,000 SF of office space at One Market Plaza for its engineering team. Terms of the deal are not yet known.

 

As you know from our coverage, Emerald Fund is re-skinning 100 Van Ness the former AAA building and building 400 apartments. We just found out that they also plan to build on 150 Van Ness, the building next to the AAA building, and four adjoining parking lots to create429 more apartments and retail. We never thought that Van Ness would ever look so good: South Van Ness will have close to 1000 new units of housing with the two Emerald Fund project. Further North on Van Ness, Marlow’s condos are almost sold out and new residential projects are planned in-between along with the Cathedral Hill Hospital. One of them is two towers at 1527 and 1545 Pine: 107 condos with street retail.

 

1501 Filbert St. a Cow Hollow condo project which is marketed as Amero will be completed end of 2014 and offer 24 condos ranging from 2 BR to 3 BR. The Developer Trumark purchased similar neighborhood unentitled sites in Pacific Heights, Portrero, Mission, Soma, Polk Street and plans to release similar products.

 

41 Tehama (behind the CNET/CBS building) if approved will be the site of 325-398 apartments and retail space. Its open space will be connected to the future Oscar Park.

 

Here’s an interesting chart of the 10 largest owners of San Francisco office space courtesy of JLL:

Screen shot 2013-11-17 at 12.09.27 PM

 

Rumor has it that several Tech tenants are interested in the 14 acre Mission Bay Parcel Salesforce decided not to develop…

 

Credit Suisse Group paid $105 million for 114 Sansome St. or a record $560 a square foot.

 

11/3/13

Lots of things have happened in the SF Commercial and Residential Real Estate Market since 10/13:

Oakland’s I. Magnin building is almost completely leased which reinforces our belief that the Oakland Residential and Commercial market offers tremendous upside right now. Harvest Properties purchased 555 12th St. in Oakland, a 20-story, 490,000-square-foot office tower at City Center. The price is not known yet. You may recall that a weeks back ago Strada and Angelo Gordon & Co. purchased two other City Center buildings: the 11-story 1300 Clay St. and the 12-story 505 14th St.

The former Twitter HQ sold: ASB purchased 795 Folsom St. for $110 million, or $600 a square foot. The 187,000-square-foot building is fully leased. Around the same time Zurich Alternative Asset Management paid $630 a square foot, or $35.2 million, for 539 Bryant St., a 55,000-square-foot building.

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Will the SF Commercial Real Estate Market Correct? We don’t know. It is hot right now and Capital pours in from all the usual suspects. Capital needs returns and the issue is whether these properties will continue to generate the forecasted returns. Tenants are for the most part Tech companies. Some have revenues many don’t. Very few are profitable and most of them have very high valuations. We also note that investors are purchasing buildings at prices over replacement costs: $600/$650 per SF in Soma which is higher than replacement cost. Another factor to consider is that low interest rates can move up any time which will make these purchases even riskier. Finally, there is an enormous commercial construction pipeline which could force prices down. This is again one of the reasons why we think Oakland, which is only 11 minutes away from SF, is such a good deal right now.

Construction began for the 754-unit NEMA apartment tower at 14 10th street and also on another apartment tower the 400-foot tower at 45 Lansing with about 230 units. Other projects about to start are the 299 units second phase of One Rincon Hill and 340-350 Fremont St., a 348-unit Tower skyscraper. Finally, 399 Fremont. A 452-unit apartment tower is also starting construction. Rincon Hill is about to get a lot of renters.

Market Square will soon have Bon Marché and food emporium called the Market. There is room for more restaurants…

A 17-unit development at 3500 19th St. at the corner of Valencia is being offered at $1,400 a square foot??? We don’t know if these units are selling and have not been able to double check the information but if they are selling at this price this would be a record for the Mission, which will on a price per SF par with Soma…

The other new SF Condo projects at the moment are Linea a 114-unit project at 1998 Market St., 98 units at 1800 Van Ness, Blanc, which we love, a 35-unit building at Larkin and Sutter and 300 Ivy St in Hayes Valley, a 61-unit condo project.

Blanc

Lyft, is rumored to be looking 60,000 SF of office space in SF. Uber is moving into an 88,000 square foot office at 1455 Market St.

Bjarke Ingels Group (BIG) is going to design 950-974 Market which includes a 250-room hotel, 316 residential units, 15,000 square feet of retail, and a 75,000-square-foot arts building. It is located at Market and Turk.

Looks like a new 262 unit condo project will be approved at on Pine between Franklin and Van Ness.

Y Combinator has quietly opened a small office near San Francisco’s Union Square following firms like Benchmark and Kleiner  set up offices here. 500 Startups is opoening an office shortly. 

Yelp moved into 150,000 square feet at 140 New Montgomery, a former Pacific Bell tower, and Airbnb took 170,00 square feet at 888 Brannan.

Interestingly 706 Mission the former home of Yelp will be a condo project and the Mexican Museum.

Office vacancy of 8% in SF commends an average rent per SF of $54/SF per year. Will the 1.5 million SF of new construction put pressure on price? This remains to be seen when such projects as Foundry Square III, and 155 Fifth St. hit the market.

The office building at 270 Brannan Street was approved.

A Civil Grand Jury report indicates that The City and County of San Francisco owns 6,000 acres, or 20 percent of the land, within its County limits and another 92,000 acres beyond outside of it. The gist of the report is that the Real Estate is not producing what it should. The report recommends:

#1: Transparency and more information on City owned properties. The web-based San Francisco Property Information Map currently used to display Planning and Building Inspection Department information should be integrated with and further developed by other departments to convey complete information about City properties. The Department of Technology and the Planning Department should work with and provide database access to all City departments enabling them to maintain the information on their properties.

#2 The online database of all properties owned by SFUSD and all City departments, including revenue-generating enterprise departments, needs to include information required by Chapter 23A of the Administrative Code [San Francisco’s Surplus City Property Ordinance].

#3 City departments, commissions and agencies should be directed to maintain and update their departmental real estate database, which appears in the Real Estate Division Map of Real Property and Property Book.

#4 The Director of Real Estate should be required to review the list annually to confirm that all departments have made a complete report on their properties, including surplus and underutilized properties, in accordance with the requirements of Chapter 23A of the Administrative Code; and the City Administrator should be required to report annually.

# 5 The SFUSD needs to designate someone who is given appropriate authority and whose time and energy is devoted to optimizing the use of surplus and under-utilized real estate through its development or disposition. That person should work with the Capital Planning Policy Committee and Surplus Property Advisory Committee to incorporate surplus and underutilized property into SFUSD’s 10-year rolling Capital Plan. The Capital Planning Policy Committee of the San Francisco Capital Planning Program should be made responsible for overseeing the publicly-owned surplus and underutilized property list for the City and for assuring that clear plans for the disposition or repurposing of such properties are generated and incorporated into the 10-year rolling capital plan of the Capital Planning Program.

# 6: 
Given the location of 135 Van Ness Avenue and 170 Fell Street in the heart of the City’s cultural center, and the historic nature of the structures, their current status is far from the highest and best use of these unique properties. Plans by SFUSD to convert the properties into the School of the Arts have not moved forward because of, among other reasons, a lack of needed funding. Yet, at the time, and now, SFUSD owned and continues to own, sufficient surplus and underutilized property that if sold could fund the entire project.

Square’s new office is 150,000 square feet on four floors of the former B of A data center on Market and will house 500 employees.

Hines is selling 101 Second St. for a rumored $272 million. The building is 374,000SF. It was purchased for $371 per SF and will probably sell for over $700 per SF.

Screen shot 2013-10-13 at 8.14.51 PM

The Mid Market gentrification is even touching the Tenderloin which sports new bars such as Redford, Trocadero, Bourbon & Branch and one Restaurant: Tradition. Vin, Elephant Sushi and Resolute are opening soon.

Renovation on The Strand Theater also in the Mid-Market will start soon and we’ll have a first class theater on Market street.

SKS Partners’ 270 Brannan St., a 200,000- square-foot office building is about to be approved.

Kilroy is marketing 333 Brannan St., a 170,000 spec building but no tenant has signed up yet.

More rental units at 350 8th street at 8th and Harrison breaking ground soon (400 units).

Homes in East Bay cities are seeing price gains far greater than homes in San Francisco, according to Zip Realty Oakland’s median home price went up 76 percent to $432,000 in August compared with $245,500 in August of 2012. In Hayward, home prices jumped 55 percent to $387,000 in August 2013. Meanwhile, San Francisco’s median went up by 20 percent to $880,000. The greater price gain could be a function of how low prices were in those cities before they rebounded, inventory etc. We think it means there are good deals in Oakland, Hayward, Berkeley and Emeryville for example.

Homes in the larger San Francisco market are 18.2% below a May 2006 peak. Condo values in the same San Francisco MSA are within 5.0% of their December 2005 peak.

Foundry Square lll a 290,000-square-foot building at 505 Howard St. is now completed

All Real Estate publications last week reported that Chinese investors are major buyers of SF Real Estate and they cite figures by Juwai.com a Chinese international property portal which indicates that there are 2.7 million high net worth Chinese and an upper class that is 60 million strong. The US is the #1 destination for these buyers. Chinese buyers spent US$30 billion on international property in 2012. Of that, US$9.08 billion was invested in the USA. The NAR ranks Chinese buyers as the second largest group of investors, after Canadians, accounting for 11% of overseas buyers purchasing homes in the US.

Golub just secured financing for the 300 foot Residential Tower (apartments) at 299 Fremont. They will also build more rentals townhomes on Clementina and three more towers on Freemont, Beal and Folsom. Occupancy for the project is 2015. A total of 545 apartments.

The Joseph D. Grant Building at 1095 Market Street was supposed to be converted to an eight-story building from office use to a hotel/hostel with 94 rooms, a 2,500 square foot ground floor restaurant, a 3,500 square foot nightclub and two rooftop terraces. It appears the sponsor will lose its entitlement. Our understanding is that you just re-apply and there are no other consequences but we could be wrong and appreciate your feedback.

Group I’s is proposing hotel and residences: mixed-use complex at 950-974 Market St. It is a 446,000 square foot project, which will front Market and Turk Streets on a Triangular piece of land. We don’t know if this project is going to be approved but if it is it will signal the fact that the mid-market gentrification is complete and will go deep inside the Tenderloin and up Van Ness which are territories that no one thought would ever be gentrified.

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