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Western U.S. real estate markets are “robust,” according to the Federal Reserve’s Beige Book analysis of regional economic conditions.

The Fed eight times a year publishes a compilation of local business snapshots from its 12 regional Federal Reserve Banks. We checked into what the Fed’s San Francisco branch – which oversees California, Oregon, Washington, Idaho, Utah, Nevada, Arizona, Alaska and Hawaii – had to say about its real estate markets as 2016 started.

We note the Fed’s change in description of market conditions from “grew at a robust pace” in this month’s report vs. “activity advanced” a year ago vs. “very low levels” in January 2011.

Quoting directly, here’s what was said about Western real estate in 2016’s first Beige Book:

Real estate market activity grew at a robust pace across most of the District. Demand for new residential units remains high, with contacts in many West Coast cities reporting ongoing reductions in vacancy rates.

Residential construction activity grew substantially, with a somewhat stronger market for multifamily units than for single-family units.

Housing prices rose further across the District, and contacts expressed concerns over affordability for low-income buyers.

On the commercial side of the market, lease rates for existing units have increased, pushing sales prices higher across the District. Yet, new commercial construction remains concentrated in a few hot markets, such as the San Francisco Bay Area and Seattle.

Contacts noted continued shortages of labor and materials and construction delays in those areas, with one reporting that commercial contractors had stopped accepting new construction projects in the final months of the year.

Compare that analysis to a year ago …

Real estate activity advanced during the reporting period. The pace of new single-family home construction increased modestly in some areas of the District, with relatively more activity in urban areas than in rural areas.

However, some contacts cited increasing costs of materials and labor and a shortage of available lots in some areas in their projections that the pace of new construction will fall back in 2015. Indeed, these contacts reported that the pace of construction permit issuance has declined.

A few contacts indicated that home sales picked up a bit in December, but some contacts reported that insufficient inventory is damping the pace of sales.

Multifamily residential real estate construction activity was strong in many areas of the District during the reporting period. Retail, office, industrial, or infrastructure projects also were widespread. Most contacts viewed the pace of construction as healthy.

However, one contact reported that some investors are concerned that, given planned construction, there soon will be an excess supply of multifamily units in their area.”

And five years earlier:

Demand in District residential and commercial real estate markets was largely unchanged at very low levels. The pace of home sales remained quite slow throughout the District.

In addition, an abundance of foreclosed properties and short sales kept inventories of available homes elevated in most areas, which put downward pressure on prices and the pace of new home construction.

Demand for rental space grew in some areas, however, with a Seattle contact noting a modest increase in construction of apartment buildings there.

Conditions continued to be weak on balance in commercial real estate markets, as vacancy rates stayed high in many parts of the District; rent reductions and other concessions by landlords remained common.

In a positive sign, however, investor demand for well-leased office buildings continued to boost market values in some of the District’s major commercial markets, such as San Francisco.

Contact the writer: jlansner@ocregister.com

Article source: http://www.ocregister.com/articles/construction-699734-district-real.html

SAN FRANCISCO–(BUSINESS WIRE)–Holliday Fenoglio Fowler, L.P. (HFF) announced today that it has closed
the sale of Alamo Plaza, a 195,147-square-foot, fortress,
grocery-anchored shopping center in the San Francisco Bay Area community
of Alamo, California.

HFF marketed the property on behalf of the seller, Invesco Real Estate.
Donahue Schriber purchased the asset.

Alamo Plaza is the only grocery/drug-anchored shopping center in Alamo,
an affluent East Bay community. Consisting of seven multi-tenant and
single-tenant buildings, the 93-percent-leased center is home to a
variety of national and regional tenants, including Safeway, Rite Aid,
Richards Crafts, Bank of America, 24 Hour Fitness, Panera Bread, Wells
Fargo, Peet’s Coffee Tea, Xenia Restaurant, Alamo Pet Care and Bagel
Street Café. Situated on 18.05 acres at the northwest corner of Stone
Valley Road and Danville Boulevard in Alamo, Alamo Plaza is proximate to
an on- and off-ramp to Interstate 680 and is midway between Walnut Creek
and Danville.

The HFF investment sales team representing the seller was led by
Nicholas Bicardo, Danny Reddin and Brandon Rogoff.

“Alamo Plaza is a top-tier grocery/drug-anchored center in the Bay Area
and one of the most sought after retail assets that have come to market
since the downturn,” Bicardo said. “The combination of location,
surrounding demographics, tenant roster and embedded value with
below-market leases checked every box for all investor groups and
resulted in an extremely competitive bidding process.”

About Invesco Real Estate

Established in 1983, Invesco Real Estate manages $61.9 billion of real
estate investments, including $36.8 billion in direct real estate
investments and $25.1 billion in real estate securities (as of June 30,
2015). With more than 400 employees in 20 offices worldwide, the group
focuses on top-down market and property fundamentals combined with
bottom-up local market intelligence. Senior members of the management
team have worked together for more than 25 years, contributing to the
consistent implementation of Invesco’s investment strategy and resulting
performance. Additional information is available at www.invescorealestate.com.

About Donahue Schriber

Donahue Schriber is a privately held real estate investment trust
(REIT), which owns and operates 66 shopping centers representing over 10
million square feet of retail space throughout California, Nevada,
Oregon and Washington. For more information about the company, visit its
website at www.DonahueSchriber.com.

About HFF

HFF and HFFS (HFF Securities L.P.) are owned by HFF, Inc. (NYSE: HF).
HFF operates out of 22 offices nationwide and is a leading provider of
commercial real estate and capital markets services to the U.S.
commercial real estate industry. HFF together with its affiliate HFFS
offer clients a fully integrated national capital markets platform
including debt placement, investment sales, equity placement, advisory
services, loan sales and commercial loan servicing. For more information
please visit hfflp.com
or follow HFF on Twitter @HFF.

Holliday Fenoglio Fowler, L.P., acting by and through Holliday GP Corp.,
a real estate broker licensed with the California Department of Real
Estate, License Number 01385740.

Article source: http://www.businesswire.com/news/home/20160112006398/en/HFF-Closes-Sale-Trophy-San-Francisco-Bay

Among the credible candidates to be the economic capital of the 21st century, the oddest and most reluctant has got to be San Francisco.

It is the main urban center of a region that is home to many of the leading corporations of the digital age, an area that has become an unparalleled hub of innovation, invention and entrepreneurship. Yet it had just 852,469 inhabitants as of July 2014, according to the U.S. Census, only 10 percent more than it did in 1950. San Jose passed it in the 1980s to become the region’s biggest city. And while San Francisco is pretty densely populated by U.S. standards, it could clearly fit a lot more people. If it were as densely settled as the New York City borough of Brooklyn, for example, it would have a population of 1.7 million.

In earlier decades, when suburban living was in vogue and the Bay area’s center of economic gravity was shifting southward toward San Jose, San Francisco’s slow growth seemed natural enough. But now more and more of the smart, ambitious young people who power the region’s economy would rather live in the city than in the tract homes of Silicon Valley.

Many of them commute south from San Francisco to the suburban office campuses of Apple, Facebook, Alphabet/Google and other tech giants. And newer tech companies (or tech-enabled companies; despite all the technical expertise at work it seems a little odd to call Uber or Airbnb tech companies) have increasingly been locating in San Francisco proper.

The result is a city that, even as its latest wave of startups begins to struggle, feels like it’s on the verge of the kind of economic leap forward that most places on the earth can only dream of. Economists have learned much in recent years about the advantages of agglomeration. Put lots of highly skilled, highly productive, highly innovative people together in the same place and the economic gains are huge. The Bay area has been such a place for a while now; what’s new is San Francisco’s opportunity to regain its role as the region’s economic epicenter, in turn driving even more economic growth in the area and — by extension — the U.S.

The city is growing. It has added about 50,000 people since 2010, and 8,900 new housing units were under construction as of last fall. Big new apartment buildings are transforming once sparsely populated areas south of downtown. But on the whole it’s fair to say that San Francisco hasn’t exactly embraced the role of boomtown. There are voter-imposed limits on office construction, new housing developments usually face protests and litigation, and local politics boasts a strong contingent of “progressives” whose main goal seems to be keeping the city from changing.

Since the 1970s, wealthy suburbs across the U.S. have become expert at preventing growth and change through zoning. By now there’s an extensive literature documenting and often decrying this. In his 2015 book “Zoning Rules,” Dartmouth College economist William Fischel explained it mainly in terms of property values — homeowners favor zoning ordinances and other growth restrictions because they keep house prices up.

That kind of homeowner opposition to growth is a big issue in the Bay area’s suburbs, an early hotbed of slow-growth sentiment, and in some parts of San Francisco. But 65 percent of the city’s housing units are rentals, and 75 percent of those are subject to rent control. Most of the San Franciscans who oppose new development do so apparently not to maximize the value of their property but to minimize the odds that they will be forced out of their apartments or otherwise priced out of the city.

There is of course something perverse about opposing residential construction in the name of housing affordability, and if one wishes to mock San Francisco’s anti-growth progressives it isn’t hard to find ammunition. But these people are not crazy to worry that a San Francisco that makes room for a few hundred thousand more tech workers will no longer be the same shabbily welcoming city “that’s been a magnet for free spirits and immigrants and working-class people for decades,” as Alternet’s Steven Rosenfeld argued a couple years ago.

Then again, “free spirits and immigrants and working-class people” can’t afford to move to San Francisco now anyway — it’s only the ones who managed to get their hands on a rent-controlled apartment years ago who can afford to stay. Here’s Sonja Trauss, a former math teacher and economics graduate student who recently founded the pro-growth San Francisco Bay Area Renters Federation:

The past is not an option. Going forward we can become either a big city, or else a highly exclusive gated community for the rich. For homeowners this is an academic question, because as owners, nothing can make them move. For renters and all new entrants (your children) this question is over whether we live in the Bay Area or not. There are 2x as many people who want to live here than do live here. The current “character” of SF isn’t very useful to people who can’t live here.

People who can’t live in San Francisco can’t vote there, though. Shifting the politics of growth in the nation’s in-demand cities is hard because most of the potential beneficiaries of that growth live somewhere else. In the case of wealthy suburbs with caps on growth, several states have tried to force them to accept more development, with limited success. Economist Fischel thinks that insuring homeowners against falling property values would be a better approach, but that hasn’t gotten much traction either.

Meanwhile, there is increasing recognition that growth restrictions restrict growth not just locally but on a national level. In a recent paper that I’ve cited before, Chang-Tai Hsieh of the University of Chicago and Enrico Moretti of the University of California-Berkeley estimated that lowering the regulatory constraints on new housing in just San Francisco, San Jose and New York to the level of the median city would lift U.S. gross domestic product by 9.5 percent. Jason Furman, chairman of President Barack Obama’s Council of Economic Advisers, argued in a recent speech that land-use regulations were also driving up inequality and reducing economic mobility. Meanwhile, my Bloomberg View colleague Paula Dwyer thinks housing affordability would be a great issue for Republican candidates to focus on.

For the foreseeable future, though, it’s still up to San Franciscans to decide whether to make room for a lot more neighbors. Got any good ideas for how to persuade them?

1. The city’s population declined from 1950 to 1980, when it hit 678,974, and has been rising since.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
James Greiff at jgreiff@bloomberg.net

Article source: http://www.bloombergview.com/articles/2016-01-11/san-francisco-can-t-stand-how-much-it-wants-to-grow

A: The real estate industry is a fascinating cycle. Having experienced different real estate markets for more than 35 years, here are my predictions:

There will be moderate increases in prices around the Bay Area, and San Francisco markets will stabilize on the higher end, but increase on properties under $2.5 million. It still comes down to supply and demand.

Interest rates will rise, but an election year will stave off any large jumps. By the end of 2016, we will see rates around 4.5 percent. Rents will continue to rise, making it cheaper to own than rent.

Banks will loosen up qualifications and money, allowing more first-time home buyers to enter the market.

All-cash offers will decrease, giving mortgage-dependent buyers their opportunity in the market.

New construction will become more relevant in the Bay Area.

Affordable housing becomes the Bay Area’s most debated topic involving politics, practicality and reality.

Jeannie Anderson,

Pacific Union Real Estate,

(415) 271-4887, janderson@pacunion.com

A: This is going to be a very good year for Bay Area real estate, as crosscurrents appear to be aligning in our favor.

Interest rates will rise, yes, but only modestly. The rise should not have as significant an impact as people may think. Let’s face it, rates will remain super attractive.

Here in San Francisco inventory levels will increase somewhat but will still remain low. Who wants to leave San Francisco?

Buyers will be sitting on the fence more. With buyers not pulling the trigger as quickly, it bodes well for sellers who will identify the shift in market conditions and move forward with their plans.

The luxury market will be under attack as buyers won’t have to purchase, and inventory will be scarce.

The local economy will remain healthy. Technology and biotech companies continue to flourish, providing continued demand and price stability.

Last, the Warriors will finish with the best win-loss record in NBA history and the Giants will win the World Series because it’s an even year.

Frank Castaldini, Coldwell Banker, (415) 846-1899, fc94114@aol.com.

A: The next 12 months should prove fruitful for Marin County, the place I work and call home.

Prices have always been high, yet should continue to grow even with rising interest rates. While this is true for the entire county, it’s especially noticeable in Mill Valley, a region that only seems to grow in demand.

Also on the rise is the amount of young singles, couples, and families leaving San Francisco in favor of Marin’s athletic lifestyle and open spaces.

These buyers are notorious for looking past traditionally popular (and expensive) neighborhoods in order to discover and revitalize previously undervalued locations.

That energy should only intensify in 2016, with pockets of vibrancy popping up in unexpected areas.

Keep an eye on San Rafael and Novato. Thanks to a growing biotech cluster, those cities are in the midst of a renaissance.

Logan Link,

Sotheby’s International Realty,

(415) 380-4300,

loganlink

@sothebysrealty.com.

Article source: http://www.sfgate.com/realestate/article/Sound-Off-Bold-predictions-for-2016-6750832.php

Flickr/Steve

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San Francisco’s booming tech market has driven up the city’s housing prices to unprecedented levels. Now it’s made the office rent price in San Francisco the most expensive in the country, too.

According to a New York Times report on Friday, San Francisco’s average office rent price was $72.26 a square foot in the fourth quarter of last year, up 14% from the previous year, narrowly beating Manhattan’s $71.85-a-square-foot price to top the country.

The report, which cited data from the CBRE Group, said it was the first time since the dot-com boom era of the early 2000s that San Francisco’s office rent price surpassed that of Manhattan.

The change is due in large part to the tech sector’s exponential growth in recent years, as nearly one-third of all office space in San Francisco is occupied by tech companies, The Times’ report said. Salesforce, Twitter, Dropbox, Adobe, Google, and Square are among the largest tech tenants in the city, each with more than 300,000 square feet of leased space.

“The market here in San Francisco has been largely driven by the tech industry, which has really been one of the growth leaders coming out of the recession,” Colin Yasukochi, CBRE’s director of research and analysis, told The New York Times.

The result isn’t too surprising considering that San Francisco and its surrounding Bay Area already have some of the most expensive housing prices in the country. San Francisco recorded the highest one-bedroom median rent in the country in January, while Oakland and San Jose each came in at fourth and fifth highest, respectively, according to online rental firm Zumper.

Zumper

But it’s unclear how much longer the bullish real-estate market will continue in San Francisco. There have been signs of multiple tech startups based in San Francisco facing layoffs and cost cuts, and the funding environment to back these companies is also expected to cool down a bit this year.

Plus, some landlords are reportedly avoiding tech startups as tenants in order to diversify their portfolio and mitigate risks associated with the startups’ short financial history. Some landlords also expect an economic downturn looming in the coming years.

Article source: http://www.businessinsider.com/san-francisco-office-rent-is-more-expensive-than-manhattans-2016-1