SAN FRANCISCO—“We seem to live in a bubble here in San Francisco.” That is according to moderator Jordan Moss, first VP of CBRE, who recently spoke on the multifamily panel at the RealShare Bay Area conference here last week. The big question on multifamily experts' mind here was how deep is San Francisco's rental pool?
Stanford Jones, EVP of IPA, says that on a macro level, there is a disconnect of income and income inequality in San Francisco. “We scratch our heads on how many people can spend $4500 on rent in the city per month,” he said. “Who knows how deep that pool is?”
Jones' concern is that when it turns off, it will turn off rapidly. But where and when that happens, remains to be seen, he added. “It will send shock waves through new and old inventory.”
Jones continued that “job formation and housing deliveries are key points here in the Bay Area. 2015 will be the same pace and the same multifamily sales volume provided we don't get a macro event.”
According to panelist Jason Pendergist, chief lending officer for Luther Burbank Savings, The region is in a unique spot where it has something unique to offer to the young workforce. Therefore, he said, “There will be a constant pressure for infill rental units, which will push the rents up.” At some point, he said, it will spill over outside the City, and “that spillover will continue to rise.”
As for new development, according to Pendergist, this market has enough critical mass to it to absorb the multifamily delivery rate of new units in the pipeline. “We are optimistic on what this state will do to stay competitive in the global marketplace,” he said. “Absent of any sort of earthquake or natural disaster that can come in and mess up the equation, all the stars seem to be aligned for the foreseeable future.”
More than 200 were in attendance at the RealShare Conference Series event, which is produced by ALM's Real Estate Media Group, which also publishes Real Estate Forum and GlobeSt.com.
Jeff Burns, SVP of Walker & Dunlop, noted that the 2008 recession wasn't driven by oversupply and while there is a lot of activity going on right now, “the area can handle the new supply of units.”
What is interesting is really labor and material costs, he added, which have gone through the roof in the last 18 to 24 months and “is delaying projects somewhat.” That generates more risk on the takeout financing side, Burns said. “We are seeing some developers think the window for low rates is wide enough now that they are just going to build… The financing market is kind of evolving to try to create processes to assist developers to take the [interest rate] risk off the table.”
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
