AvalonBay’s Ocean Avenue apartment building joined the market last year just in time to cash in on 9.9 percent rent growth in San Francisco in 2013. Rents won’t be rising as fast this year.

Blanca Torres
Reporter- San Francisco Business Times

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Explosive rent growth in the Bay Area appears to be slowing down.

Apartment rents are expected to grow about the same this year in both San Francisco and the East Bay, according to data from Marcus Millichap.

In San Francisco, the firm predicts rents will rise 3.2 percent to an average of $2,455 per month.

In the East Bay, rents will grow by 3.3 percent to an average of $1,575 per month.

What does that mean? It’s still way cheaper to live in the East Bay than San Francisco (duh!), but also that 2013 is proving to be a year of moderation compared with 2012, when San Francisco rents shot up 9.9 percent and East Bay rents grew by 6.9 percent.

Not only is rent growth slowing down, but more units are hitting both markets. In San Francisco, 3,000 new apartments will be completed this year and about 2,100 will come online in the East Bay.

Addition of new supply should help quell soaring demand for housing.

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

Article source: http://www.bizjournals.com/sanfrancisco/blog/2013/07/bay-area-apartment-rents-slowing-down.html

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Tenant advocates and property managers in San Francisco’s hyperactive real estate market are fretting about new earthquake safety rules that will spike the cost of repairing older buildings and ultimately increase monthly rents.

 
On the anniversary of the 1906 earthquake that killed hundreds of people and leveled much of San Francisco, the city approved a new law Thursday requiring thousands of apartment buildings to be upgraded to better withstand tremors.
 
Owners of about 3,000 multi-unit residential buildings sprinkled throughout the city will have to shoulder the sizeable costs of the seismic retrofits but will be allowed to pass on those costs to tenants, although some may qualify for an exemption.
 
In a city where a one-bedroom apartment rents for nearly $2,200 per month, any increase to the already sky-high cost of housing prompts a conversation.
 
“Tenants are struggling already, so paying even an extra $50 on top of that is pretty hard for most people,” said Ted Gullicksen, the director of the nonprofit San Francisco Tenants’ Union. “The heftiest rent increases will be in the smaller buildings, just because there are fewer tenants to share the costs.”

Mayor Ed Lee signed the bill Thursday, saying the measure would better protect the nearly 60,000 people who live or work in those buildings from potential disaster.
 
“This mandatory seismic retrofit program will protect San Franciscans, protect our housing stock and ensure San Francisco can rapidly recover from the next earthquake,” Lee said in a statement. “We renew our commitment to making sure that disasters such as the 1906 earthquake and fire do not devastate our city again.”

The retrofitting legislation covers so-called soft-story multi-unit buildings built before building codes were changed in 1978 – that is, those with three or more stories that are wood-framed and have a garage or other similar opening on the ground floor.
 
Owners of suspected soft-story buildings will receive notices in the mail, which will give them a year to get an inspection to determine whether they need to retrofit.
 
Authorities estimate the upgrades could cost around $60,000 to $130,000 per building. Lee said banks are developing financing packages for owners to help pay for the work.
 
As part of a compromise with tenant advocates, the city also agreed to streamline its process for qualifying those who make less than $78,000 per year for a hardship exemption from the pass-through costs.
 
A separate, pending city ordinance would exempt single parents on welfare or senior citizens from the retrofitting-related rent increases.
 
While much of the city’s real estate market is soaring thanks to a tech boom that has attracted giants such as Twitter to the city’s downtown, many apartment owners are limited in what they can charge because most private units are rent controlled, said Charley Goss, government and community affairs coordinator of the San Francisco Apartment Association. That is often the case for owners of the buildings most likely to be affected in the Mission, Western Addition and Marina neighborhoods, he added.
 
“The owners that can best shoulder the costs probably would have rented their apartments recently, so would be getting their full market value,” he said. “Those who haven’t will likely have to get a refinance on their building or get a second mortgage or a loan.”
 
Robert Link, who owns a small property management firm, said he would have to spend about $70,000 to retrofit an Edwardian multi-unit building he owns in the inner Richmond.
 
“The ultimate beneficiary here is not the property owners but San Francisco tenants, because doing these upgrades will preserve rent-controlled buildings,” he said. “Really what this requires is managing tenants’ needs and expectations of the process, and giving them advance notice of as much as you can of the work to be done.”
 
San Francisco’s rents have been climbing in the last several years, leveling off only recently as experts say the market has approached saturation.
 
Rents average $2,175 for a one-bedroom, one-bathroom apartment, according to RealFacts, a Novato consulting group that tracks apartment complexes with 50 or more units.
 
After the Loma Prieta earthquake in 1989, San Francisco mandated retrofitting of unreinforced masonry, or brick, buildings. But the effort to bolster soft-story apartment buildings was a tougher sell, and was opposed by owners and tenants rights advocates concerned over the rent increases.
 
Seismologists predict that a significant earthquake in the region – two to three times as strong as Loma Prieta – is likely to occur within the next 30 years.
 
“When an earthquake happens, these buildings will be vulnerable. If we’re going to be able to recover, this is a necessary step,” Goss said.

Copyright Associated Press

Article source: http://www.nbcbayarea.com/news/local/San-Francisco-Mayor-Ed-Lee-Signs-Quake-Retrofit-Law-203827081.html

“In Walnut Creek, we haven’t seen the big rent increases that we’ve seen in other areas,” says David Fiore of Mill Creek Residential. “There’s some room for growth.”

Apartments remain the darling for Bay Area housing development, but condo conversions and new construction are poised to make a comeback.

Sticker-shock-inducing rental rates — such as $4,000 for a one-bedroom — in San Francisco have made outlying areas such as the Peninsula and the Interstate 680 corridor more attractive for renters and developers.

About 2,500 apartments are expected to hit the San Francisco market in 2013 with hundreds more under construction in cities such as Redwood City, Foster City, Dublin, Emeryville and Berkeley.

Next year, developers in Walnut Creek plan to break ground on numerous apartment projects such as Mill Creek Residential’s 126 units at 1960 North Main St. and Laconia Development’s 141 units at 1500 N. California Blvd.

“In Walnut Creek, we haven’t seen the big rent increases that we’ve seen in other areas,” said David Fiore of Mill Creek. “There’s some room for growth.”

Mill Creek recently broke ground on the 105-unit Mission Piers in San Francisco’s Dogpatch neighborhood, which will probably start leasing in the first half of 2014, and Walnut Creek will finish in late 2014. Like many developers, Mill Creek projects rents to keep growing or at least remain steady by the time units hit the market, Fiore said.

Soaring apartment rents are also making buying a more palatable alternative. New for-sale housing, whether condo or single-family, is finally on the upswing. Homebuilders with units ready and on the market have seen brisk sales at their developments, and many say they can’t find enough development sites in the core Bay Area. It’s a function not so much of a booming economy but the result of a lack of inventory across the board.

J.K. Dineen covers real estate for the San Francisco Business Times.

Article source: http://www.bizjournals.com/sanfrancisco/print-edition/2013/01/04/residential-real-estate-balance.html

“Oakland is the less expensive alternative to San Francisco,” said Sarah Bridge, president of RealFacts, a Novato company that collects information on rents at large, professionally managed apartment complexes. “It’s an urban core and offers some of the same amenities on a small scale, and is still about $800 (a month) less expensive than San Francisco. It’s a spillover from the growth occurring in San Francisco.”

The average asking rent at buildings with at least 50 units in Oakland hit $1,925 in the third quarter, up 19 percent from the same time last year, RealFacts said. That figure averages rents for units ranging from studios to three bedrooms, but the trend is just as pronounced for each size. One-bedroom apartments, for instance, were asking $1,761, a 20.1 percent increase from a year ago, RealFacts said.

San Francisco’s already sky-high rents continued climbing, with a new average asking of $2,768 at big complexes, up 7.6 percent from a year ago. San Jose saw a 9.6 percent increase to an average of $1,845, RealFacts said.

Apartment hunters on both sides of the bay are reeling from sticker shock.

Matt and Jennifer Renner are moving back to the Bay Area after a few years living in Brooklyn and Boulder, Colo. They’re seeking a two-bedroom in Oakland for about $1,900, Despite both having stable employment, good credit and excellent references, the pickings are slim.

“In the four years we’ve been gone, it’s staggering how much the rents have gone up,” Matt Renner said. “We considered looking at San Francisco, but the rental market there was crazy, comparable to Manhattan.”

Big increases in 4 years

In 2008 when they were last here, it was a different story, he said. “I was in a three-bedroom, really nice house in the Lower Haight for $3,000 a month,” Renner said. “My wife had a nice one-bedroom in a safe neighborhood in Oakland for $875 a month. Now that’s almost doubled.”

In San Francisco, what passes for good news is that the trajectory for rent hikes appears to be slowing, which might mean the market is close to saturation.

“It’s not as if San Francisco is going to experience a rent drop, but I think it’s gone as far as it can go,” Bridge said. She said she thinks San Francisco is following a pattern set by East Coast cities such as New York and Washington, which saw rapid price appreciation and now appear to have maxed out the increases.

“It’s not a demand issue; there would be more people willing to rent an apartment (in San Francisco). It’s affordability,” she said. “There aren’t that many high-paying jobs that (landlords) can just keep raising the rents to ridiculous levels.”

People who are apartment- hunting in San Francisco continue to report that it’s a blood sport.

‘Massive changes in wealth’

Bo Lu, co-founder and CEO of FutureAdvisor, which offers online financial advice, is moving his seven-person Seattle startup to San Francisco to be closer to the talent pool and the startup community.

He and his girlfriend, Marlo Struve, hired real-estate agent Wendy Willbanks, who runs an “apartment concierge” company called She Moves You, to help them look. After four intensive days of touring more than a dozen units, they signed a lease on a two-bedroom in the Castro for $3,200 a month, including parking.

“The cost was enormous in both time and money,” he said. His theory about the escalating rents takes a macroeconomic view of the tech boom.

“Many startups like mine are replacing humans with computers,” he said. “Whenever you take an industry that used to employ tens of thousands and instead employ a few hundred engineers, you end up with massive changes in wealth. Engineers are being paid a lot, so they are bidding up these insane prices.”

Willbanks, who sees plenty of units in her capacity as an apartment scout, said the rent increases are astounding.

“It’s just insane; $3,000 a month is a mortgage payment,” she said. “Some of the square footages (for that) are horrendous. These places are 600 to 900 square feet, and they’re charging three grand a month.”

Target for investors

The escalating rents make Bay Area cities increasingly attractive targets for large-scale real estate investors.

Ivanhoé Cambridge, the real estate subsidiary of a major institutional fund manager in Quebec, has spent more than $600 million in the past year buying apartment complexes from Cupertino to San Jose, totaling 2,300 units. It plans to build a high-end, 648-apartment complex in San Jose in partnership with Shea Properties, breaking ground in the spring with occupancy in about 2 1/2 years.

“We like the dynamic of the employment base. We like the fact that there are natural barriers to entry in the area,” said Sylvain Fortier, president of the residential division. “We like the combination of more tenants in an environment where new supply may not meet demand. We are seeing market increases on rents that are (already) fairly substantial. That will not continue forever, obviously.”

Managing expectations

Lu, the Seattle entrepreneur who is moving his company here, said he knows his employees will confront similar challenges when they house-hunt.

“When I get back, I will tell my team to manage their expectations,” he said. “In Seattle you can get a 700- or 800-square-foot place with parking in a nice neighborhood with a view of the water for $1,000 a month. They should budget time, be patient and expect prices that we’ve never seen before, even though we live in a metropolitan area. This is an order of magnitude beyond what I’ve ever seen.”

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com

Article source: http://www.sfgate.com/business/article/Apartment-rents-rise-in-Oakland-San-Francisco-3961019.php

“Oakland is the less expensive alternative to San Francisco,” said Sarah Bridge, president of RealFacts, a Novato company that collects information on rents at large, professionally managed apartment complexes. “It’s an urban core and offers some of the same amenities on a small scale, and is still about $800 (a month) less expensive than San Francisco. It’s a spillover from the growth occurring in San Francisco.”

The average asking rent at buildings with at least 50 units in Oakland hit $1,925 in the third quarter, up 19 percent from the same time last year, RealFacts said. That figure averages rents for units ranging from studios to three bedrooms, but the trend is just as pronounced for each size. One-bedroom apartments, for instance, were asking $1,761, a 20.1 percent increase from a year ago, RealFacts said.

San Francisco’s already sky-high rents continued climbing, with a new average asking of $2,768 at big complexes, up 7.6 percent from a year ago. San Jose saw a 9.6 percent increase to an average of $1,845, RealFacts said.

Apartment hunters on both sides of the bay are reeling from sticker shock.

Matt and Jennifer Renner are moving back to the Bay Area after a few years living in Brooklyn and Boulder, Colo. They’re seeking a two-bedroom in Oakland for about $1,900, Despite both having stable employment, good credit and excellent references, the pickings are slim.

“In the four years we’ve been gone, it’s staggering how much the rents have gone up,” Matt Renner said. “We considered looking at San Francisco, but the rental market there was crazy, comparable to Manhattan.”

Big increases in 4 years

In 2008 when they were last here, it was a different story, he said. “I was in a three-bedroom, really nice house in the Lower Haight for $3,000 a month,” Renner said. “My wife had a nice one-bedroom in a safe neighborhood in Oakland for $875 a month. Now that’s almost doubled.”

In San Francisco, what passes for good news is that the trajectory for rent hikes appears to be slowing, which might mean the market is close to saturation.

“It’s not as if San Francisco is going to experience a rent drop, but I think it’s gone as far as it can go,” Bridge said. She said she thinks San Francisco is following a pattern set by East Coast cities such as New York and Washington, which saw rapid price appreciation and now appear to have maxed out the increases.

“It’s not a demand issue; there would be more people willing to rent an apartment (in San Francisco). It’s affordability,” she said. “There aren’t that many high-paying jobs that (landlords) can just keep raising the rents to ridiculous levels.”

People who are apartment- hunting in San Francisco continue to report that it’s a blood sport.

‘Massive changes in wealth’

Bo Lu, co-founder and CEO of FutureAdvisor, which offers online financial advice, is moving his seven-person Seattle startup to San Francisco to be closer to the talent pool and the startup community.

He and his girlfriend, Marlo Struve, hired real-estate agent Wendy Willbanks, who runs an “apartment concierge” company called She Moves You, to help them look. After four intensive days of touring more than a dozen units, they signed a lease on a two-bedroom in the Castro for $3,200 a month, including parking.

“The cost was enormous in both time and money,” he said. His theory about the escalating rents takes a macroeconomic view of the tech boom.

“Many startups like mine are replacing humans with computers,” he said. “Whenever you take an industry that used to employ tens of thousands and instead employ a few hundred engineers, you end up with massive changes in wealth. Engineers are being paid a lot, so they are bidding up these insane prices.”

Willbanks, who sees plenty of units in her capacity as an apartment scout, said the rent increases are astounding.

“It’s just insane; $3,000 a month is a mortgage payment,” she said. “Some of the square footages (for that) are horrendous. These places are 600 to 900 square feet, and they’re charging three grand a month.”

Target for investors

The escalating rents make Bay Area cities increasingly attractive targets for large-scale real estate investors.

Ivanhoé Cambridge, the real estate subsidiary of a major institutional fund manager in Quebec, has spent more than $600 million in the past year buying apartment complexes from Cupertino to San Jose, totaling 2,300 units. It plans to build a high-end, 648-apartment complex in San Jose in partnership with Shea Properties, breaking ground in the spring with occupancy in about 2 1/2 years.

“We like the dynamic of the employment base. We like the fact that there are natural barriers to entry in the area,” said Sylvain Fortier, president of the residential division. “We like the combination of more tenants in an environment where new supply may not meet demand. We are seeing market increases on rents that are (already) fairly substantial. That will not continue forever, obviously.”

Managing expectations

Lu, the Seattle entrepreneur who is moving his company here, said he knows his employees will confront similar challenges when they house-hunt.

“When I get back, I will tell my team to manage their expectations,” he said. “In Seattle you can get a 700- or 800-square-foot place with parking in a nice neighborhood with a view of the water for $1,000 a month. They should budget time, be patient and expect prices that we’ve never seen before, even though we live in a metropolitan area. This is an order of magnitude beyond what I’ve ever seen.”

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com

Article source: http://www.sfgate.com/realestate/article/Rents-rise-in-S-F-Oakland-San-Jose-3961019.php