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Bay Area retail development surges

Mon, 30 Sep 2013 02:25:09 +0000

The Bay Area is enjoying its strongest surge of retail expansion in years, fresh evidence that the wounds inflicted by the Great Recession are healing.

Developers are building retail projects at a brisk clip, demand for retail space has surged and vacancy rates have dwindled, and merchants are scouting for sites to open stores, according to realty experts who track the retail sector.

“This is definitely the strongest market for retail in the Bay Area since the downturn, no question about that,” said Garrick Brown, director of research with Terranomics, a realty brokerage that specializes in retail properties and tenants. “There is a lot of demand all over the Bay Area for retail space.”

At the end of June, the nine-county Bay Area had about 1.3 million square feet of retail sites in the pipeline — defined as actually under construction or about to launch construction — according to Terranomics. That is up from 1.1 million in mid-2012 — and well ahead of the 150,000 square feet in the retail pipeline in mid-2009, which was the year after the worst of the financial crisis of 2008, Terranomics experts said.

“We are leasing everything we can touch,” said David Taxin, a partner with Meacham/Oppenheimer, a commercial realty brokerage. “I’ve been doing this for a long time and this is definitely the strongest demand by retailers in years.”

All of this stems from the perceived economic strength of the region.

“You have the demographics and the economy, job creation and the relatively low unemployment rate,” Brown said. “That’s what retailers are looking for. They want a sure thing, and the Bay Area nails it on all fronts.”

In another sign of the health of the market, vacancy rates are declining steadily for retail spaces in the Bay Area. At the worst part of the current cycle, vacancy rates peaked at above 7 percent during 2010. Now the rate in the nine-county region is 5.8 percent, according to Terranomics.

In some spots, the demand is even higher. San Mateo County, San Francisco and Marin County are all regions where demand outstrips supply.

“On the Peninsula and in San Francisco, there is really nowhere to build, and the development process is very difficult, even if there are places to build,” Brown said. “The East Bay and Santa Clara County are the most welcoming for retail development.”

In Santa Clara County, the largest retail center now under construction is Village Oaks in South San Jose, a 320,000-square-foot complex that will be anchored by Target and Safeway. In the East Bay, the biggest retail projects under construction are a 140,000-square-foot Target store at Alameda Landing Shopping Center in Alameda, and an 80,000-square-foot Foods Co store in Oakland’s Foothill Square. San Francisco’s largest project is the 270,000-square-foot Market Street Place.

Retailers as big and familiar as Target, Safeway and Whole Foods are on the hunt for new space. But they are joined by a wide range of other stores, from Walmart and its neighborhood markets to Jamba Juice and Five Guys.

“We are ramping up our real estate efforts again in the Bay Area,” said Adam Smith, executive coordinator for store development with Whole Foods. “We are back where we were in the early 2000s, actively pursuing sites and leases.”

During those peak years, Whole Foods opened about five stores a year in the Bay Area. That’s down to about two stores a year. Whole Foods has 30 stores here.

Calling it “a great market for us,” Smith noted “the Bay Area is the birthplace of the natural and organic food movement.”

Whole Foods just opened its first store in Fremont, and is building a store near downtown San Jose at The Alameda and Stockton Avenue that should open during the second half of 2014. It also recently disclosed plans to open a new store in Dublin and its second store in Walnut Creek.

Target has been active with store openings in San Jose and the East Bay, and it is even finding sites in crowded San Francisco.

“The Bay Area is a region Target has an eye on,” said Matias Cavallin, a Target spokesman. “The economy here is really allowing us to gear up for more store openings.” Target has 54 stores in the Bay Area.

Bay Area cities welcome the heightened activity, because the increase in retail sales helps fill municipal coffers.

“During the downturn, when taxes were lean, we really felt the pinch,” said John Lang, chief economist with San Jose’s Economic Development Department. Now, he said, “retail sales are growing, and we are seeing a growth in tax revenue.”

During the 12 months ending in June, San Jose generated roughly $13 billion in taxable sales, up 3.4 percent from the same period that ended in June 2012. It also was 21 percent above the $11.03 billion in taxable sales during the trough of the retail downturn, the 12 months ending in June 2010.

Some of the shoppers at the opening of the new Whole Foods in Fremont appeared to be confident about their own economic circumstances.

“Over the last year, the economy has improved a lot,” said Jessica Thompson, of Union City. “I feel better about spending money.”

Contact George Avalos at 408-859-5167 or 408-373-3556. Follow him at Twitter.com/georgeavalos.

Article source: http://www.mercurynews.com/business/ci_24193668/bay-area-retail-development-surges

Navigating the Bay Area Real Estate Market

Thu, 28 Mar 2013 19:26:13 +0000

A real estate agent tours a home for sale during an open house in San Francisco. According to real esate agents, in the current market environment, not having inside knowledge will prevent people from getting the house they desire. (Justin Sullivan/Getty Images)

Century 21 Realty Alliance president and broker Orhan Tolu shares what he knows to help buyers and sellers navigate the Bay Area’s strong and growing real estate market. The company had the biggest market share growth last year—357 percent—in the entire state of California when Century 21 Realty Alliance made its move into San Francisco, completing 850 transactions in their first year, with roughly 11 agents.

The Commercial Window

“This is the year to buy,” says Tolu.

If you have the capital, commercial properties are what you want to invest in, especially in San Francisco, Tolu says. In the current economy, it costs twice as much if you want to build a new building than what you can buy one for, and commercial property values are still comparatively low compared to housing. You might be able to buy a building for $200 per square foot, but it would cost about $400 per square foot to build that building today—and land is getting increasingly scarce.

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“Commercial is always the last sector in the real estate market to fall, and is the last one to pick up,” says Tolu, who has 15 years of experience in selling commercial real estate. “So it always happens in that cycle.”

“Right now there’s still a lot of vacancy in office space, there’s a lot of vacancy in retail,” Tolu said. “Commercial went up, rent went up, and there is a shortage of listings in apartments, too. But it’s not as bad as houses.”

“On the office or retail sector, I think it’s going to take another two years for the market to fully heal and become as good as residential in the state,” Tolu said.

In the next four to five years, Silicon Valley’s expansion will continue, and the real estate market is just growing. Analysts say the market has still not returned to normal levels, making this a good time to jump on a property if one is looking to invest.

“Real estate is maybe going to appreciate 30 to 40 percent in the next two years,” Tolu said, compared to banks or investment in stocks. “So if you add the appreciation plus net income return, it’s going to be more than 20 percent increase in a five-year time period, so there’s nothing better than a commercial real estate investment in the world, nothing better.”

Compared to other real estate sectors, “maybe you pay a little bit too much compared to the other areas, your net cap is less, but your appreciation is always much, much higher,” Tolu said.

Overseas investors may not be familiar with the market or the nuances of the way sales are made in each city. With the purchases of commercial property, there’s a big difference from housing, Tolu says. With residential real estate, buyers can look in newspapers, magazines, or search online, but commercial listings are less frequent.

Tolu says that in Silicon Valley, there are about 15 realtors who specialize in commercial real estate, and 50 to 60 in the Bay Area. In most transactions, the realtors can just make a few calls among themselves and sell the property without listing it on the market. If you want to invest in commercial real estate, be sure to find a local professional commercial real estate agent, he suggests.

International Buyers

Foreign buyers will be at a disadvantage if they search overseas. It’s necessary to be in the United States in order to even start the search, go to showings, and buy a house with the limited time buyers have to bid on properties. For international buyers, working with a company that has a large global network can greatly help facilitate the process and improve your chances of getting that house.

Just recently, Tolu said, a Century 21 real estate broker from London gave him a call—two people from London wanted to purchase a property in San Jose.

“She already did the search for me, she already did everything for me,” Tolu said. “All I have to do is send one agent to go show [the property], to take care of them.”

Many buyers in the Bay Area may be looking for something that requires specialized knowledge—condominiums, for example, are different from houses, and it’s best to choose an agent with that specialization. Properties are often sold within a week of listing, and some buyers get hasty after not being able to get a property after a certain amount of time, leading to bad decisions.

Use a Better Network

It’s crucial to have the most updated information while doing your search—lest you start to prepare to bid for a property that’s already sold. There are many popular online listing sites, like Trulia, but how up to date are they?

Listing information is released within 24 hours on Century 21’s website, Tolu says, but many other real estate sites take their listings from Century 21’s listing generator, and often aren’t updated until 72 hours after it’s available. There are even houses that are sold the next day, which the agents would know, but websites might not show.

Experience Is Key

In the current market environment, not having inside knowledge will prevent you from getting that house. Many buyers lose three or four properties before they start looking for help.

“[There’s] a huge shortage of listings. I’ve never seen a shortage like this in the last 50 years,” Tolu said. “And if you look at the data, the listing comes in today, and tomorrow it’s gone already.”

Sellers barely need to advertise, Tolu says. “You just put it in the Internet and somebody will buy it with a high price anyway. Why spend money for advertisement?”

A good broker will know the ins and outs of the neighborhoods you’re interested in, and be able to help you navigate the market, where prices are rising daily. “Rely on your broker, because your broker and your agent have much more updated information than the Internet.”

Pricing isn’t a sure thing in this market, and buyers who caution to bid 10 percent above asking price might end up with a house only months later, when asking prices too have gone up 20 percent, according to Tolu.

“If a house comes along and you don’t get the right advice, you’re going to lose that house anyway,” Tolu said. “Each time you lose, the price is going to keep going up and up. Rather than waiting six months and having the price go up, work with an experienced agent and you’ll buy it at your first look.”

Expand Your Options

Most buyers make the mistake of starting with an area they like and then look at what houses are there, Tolu said. It’s a common mistake.

If you only consider buying a house in a particular neighborhood or city, your choices are very limited, and if there are no listings, you’re stuck. Broaden your search to nearby areas, Tolu suggests, and look at their school districts as well. Then work with an experienced agent and bid right the first time.

School Districts

If you delay or don’t get the right information and haven’t gotten the house in the school district you want come September, it might affect your children’s education.

“If you do it at the right time, then your kids will go to the better schools—good schools,” Tolu said. “Otherwise in September when the schools open, if you still don’t have a property, you don’t have a good location or a good school for your kids.”

If you buy a house in a better school district, you won’t have to spend money on private schools, which can be at least $20,000 to $30,000, and very time-consuming to drive to and from, Tolu said.

Additional reporting by David Zhang

The Epoch Times publishes in 35 countries and in 21 languages. Subscribe to our e-newsletter.

Article source: http://www.theepochtimes.com/n2/business/navigating-the-bay-area-real-estate-market-370116.html

Emeryville’s Public Market is bought by a real estate investment venture

Thu, 15 Nov 2012 08:44:32 +0000

EMERYVILLE — The Public Market Emeryville, a prominent retail and office center in the East Bay, has been bought for about $54 million by a group of realty investors, an indication the Bay Area’s retail sector is doing well.

The 270,000-square-foot complex, located on Shellmound Street near the Interstate 80 and Powell Street interchange in Emeryville, was bought by San Francisco-based City Center Realty Partners and New York City-based Angelo Gordon.

Over time, the new owners intend to add another 800,000 square feet that will include retail and offices. At present, Public Market Emeryville consists of stores, restaurants and offices.

Terms of the sale weren’t officially disclosed. However, people with knowledge of the transaction and the market estimated that Public Market Emeryville was bought for a price somewhere in the range of $52 million to $60 million.

The purchase of the center came after an extensive renovation engineered by TMG Partners and Rockwood Capital, the group that sold the retail and office complex.

“Our renovation of the Public Market has created a strong platform for continued innovative development of the property with an infusion of new capital and enthusiasm for a dynamic Emeryville,” said Michael Covarrubias, TMG’s chief executive officer.

One of the biggest challenges the center faced was the abrupt exit of one of its prime retailer, Borders Books. The bookstore imploded during the

recession and vacated numerous store sites, including Emeryville.

To fill the space, TMG found robust replacements in Urban Outfitters and Guitar Center.

“Emeryville is a thriving city,” said Mark Stefan, an executive with City Center Realty Partners. “Public Market is a great place to expand a unique mixed use community into a model sustainable infill project.”

The purchase points to a strong retail market in the Bay Area, which enjoys a stronger job market than the nation overall.

“There absolutely is confidence in core retail markets,” said Solomon Ets-Hokin, a senior vice president with Colliers International, a commercial realty brokerage. “Prices are good and there is unprecedented demand for good retail property. And Emeryville is such a great retail node.”

Brokers believe that plenty of cash is sitting on the sidelines, waiting to buy top-notch retail projects.

“Emeryville is clearly one of those markets that will have the growth potential that investors want, that will provide a respectable return in this economy,” said John Sechser, a senior vice president and primary retail agent for the Walnut Creek office of Transwestern, a realty firm.

In the East Bay, investors have a tentative deal to buy the Safeway-anchored Pleasanton Gateway retail center in Pleasanton, near the Alameda County Fairgrounds on Bernal Road. And downtown Pleasant Hill is going up for sale, with buyers starting to line up to grab that choice property.

“Pension funds, private opportunity investors, real estate investment advisors, all want infill retail that’s in a market protected from a lot of competition,” said Kevin Van Voorhis, a Colliers senior vice president.

Contact George Avalos at 925-977-8477. Follow him at twitter.com/george_avalos.

Article source: http://www.mercurynews.com/real-estate/ci_21996696/emeryvilles-public-market-is-bought-by-real-estate