Part 2 of 2
SAN FRANCISCO—On the heels of the successful sell out of five San Francisco condominium developments, GlobeSt.com recently spoke with Alan Mark, president and founding partner of The Mark Company, to discuss investor opportunities, pricing outlook, foreign investment and employment stats in this second part of this two-part interview.
GlobeSt.com: Where are the opportunities for investors, developers and homebuyers, and what is the outlook for pricing?
Alan Mark: In most urban centers, the condominium market still falls behind demand. For example, cities like San Francisco, Seattle, Los Angeles, San Diego and Portland have experienced low inventory for some time. Gen Y, the largest group that's come of age since the recession, has a huge desire to live in the center of the city. Even young Baby Boomers are eager to move back to the urban cores and essentially pick back up where they left off before they made the move to the suburbs to raise families. Each of the major cities we track has a pipeline geared heavily toward rental housing. For example, only 18% of the 4,178 units under construction in San Francisco today are slated to be for sale. There is tremendous opportunity for developers to get into the market, but sky-high rental prices are tempting.
GlobeSt.com: What role does foreign investment play in residential development in San Francisco?
Mark: We see an increasingly high percentage of international buyers vying for a piece of the market and pumping capital into all areas of new real estate developments. Chinese investors and buyers are drawn to California, especially San Francisco and Los Angeles, because of the area's growth and potential for strong ROI. They see great opportunity–attractive lifestyle, good education for their children and large Chinese-American population with a strong connection to China. They have easy access to capital and are eager to jump into the market. They are familiar with high-rise condominium development, and the clean air and weather are big attractions, especially for parents wanting a healthy environment for their children.
Chinese developers are responsible for more than 1,000 condominium units under construction in Downtown Los Angeles and have a large presence in San Francisco. Alternative investment funds like EB5 Funding have created significant opportunities for Asian investors.
GlobeSt.com: In what way are the employment statistics in San Francisco actionable by developers?
Mark: In San Francisco, we have a 3.5% unemployment rate and more jobs have been created here than in 47 other states. A big wave of people in their 20s and 30s are moving here. They've secured jobs, but now their bigger challenge is finding a place to live. With rental rates now higher than Manhattan, buying a home becomes a more palatable option. Developers can take advantage of strong employment statistics by getting to market quickly and even outreaching to the employers that are seeing the most growth to help place transplants. In many cases, parents are becoming more active in finding their children condos. We see that one out of every two buyers have their parents join them on their tour, sometimes providing down payment assistance and co-signing mortgages.
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