How long can the Bay Area apartment boom last?

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John Protopappas of Madison Park Financial developed the Lampwork Lofts in West Oakland.

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Blanca Torres
Reporter- San Francisco Business Times


Development activity in the Bay Area keeps booming with several thousand residential units under construction, but how long will the boom continue?

As long as jobs keep growing and interest rates stay low, housing developers say.

“Right now, the financing costs have been as low as they have ever been — that’s a huge incentive,” said Oz Erickson, head of the Emerald Fund, a firm that has close to 600 units under construction and plans to start 400 more in the next year in San Francisco. “With the very strong job growth and interest rates where they are — both of those factors mean you can build housing.”

The current boom cycle comes after one of the worst downturns in development activity after the Great Recession. Most real estate cycles go between seven and 10 years, so depending when you start counting, the Bay Area could be mid-way through the current cycle or past the mid-way point.

With residential rents shooting up by more than 25 percent in San Francisco since the recession, according to data from Marcus Millichap, apartment developers have been eager to bring new units to the market. While developers are expected to deliver close to 10,000 units in San Francisco in 2014 and 2015 combined, that is not enough to match the city’s recent job growth, Erickson said.

Even in places like Oakland, where development activity has been anemic the past few years, rents are going up and housing demand is growing, said John Protopappas, head of Madison Park Financial, the only firm to build large market-rate projects in Oakland for the last three years.

The firm completed Bakery Lofts 3 in 2013, finished up 92 units at Lampwork Lofts this summer and started construction on 101 units at 3900 Adeline last month. Leasing at Lampwork started in July and the building only has eight units.

Blanca Torres covers East Bay real estate for the San Francisco Business Times.

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