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High Altitude $20,000 A Month Condo in San Francisco

It’s a sort of castle condo in the San Francisco sky. Measuring in at 3,750 square feet and covering two floors this condo is not only sky bound, but pretty much stratospheric in terms of rent. Try $20,000 per month. Shell that out and you have a luxury condo with uber amenities and features perched with a gorgeous high floor view in the Cow Hollow and Pacific Heights neighborhoods at 2134 Green Street.

The views include uninterrupted panoramas of the Golden Gate Bridge and sweeping east across the San Francisco Bay—all through floor-to-ceiling windows that are clear as gin. The unit includes six bedrooms and four-and-a-half bathrooms, a cavernous living room, foodie kitchen, a variety of study or leisure rooms, custom designed and built furniture, and two laundry rooms. The apartment was completely redone in 2010, and is meant for families coming to SF for the first time from out of state or country.

This condo is not the most expensive. It is the 6th most expensive, with the top price unit coming in at $28,000 per month at 765 Market Street.

Office Leases in San Francisco in 2018 Break the Ceiling

Back in 2017 the record for large office leases was broken when 20 were signed and office tower space was filling up fast. It was predicted that the age of very big office leasing was finished in SF. However, 2018 is continuing the blistering pace of the whale office space lease deals. So far, fourteen deals have been inked on spaces larger than 100,000 square feet – according to a story in bizjournals.com.

Standing on top of all the other deals is the 756,000 square feet deal in Park Tower signed with social media behemoth Facebook. Park Tower is one of two new office buildings coming online this year. It won’t be until 2020 that the next large scale office space building opens to tenants.

Other big office leases in SF this year include: WeWork leasing 103,000 square feet in 1 Post St; iRhythm took up 120,000 square feet in the Zynga headquarters building; Amazon grabbed 143,000 square feet in 535 Market; Twitter reupped for 215,000 square feet in 1355 Market St.

$1 Billion Warriors’ Center Featuring Popular Local Restaurants

Warriors’ balletic basketball and award-winning local SF food go together like passes from Draymond Green to Steph Curry. A perfect 3 pointer. With the Golden State Warriors’ Chase Center dribbling down court towards completion, the food restaurants in the Center are taking on more of a foodie aura as top local eateries are joining the team. The Center seats 18,000, which is a lot of hungry, discerning fans. Plus the Warriors’ Center includes two office buildings, and a plaza as big as Union Square for retail stores.

A journey to the Warriors’ Center is also an odyssey for excellent eating options, either before the game, or courtside while the game pounds the court. Two more restaurants are joining the roster. Two SF-based incubator kitchens—La Cocina and Old Skool Café (a youth run supper club)—are in as part of a push by the Center’s executives to be inclusive of women, youth and minority entrepreneurs.

Other fine eateries coming to the Center are: Tacolicious, Bakesale Betty, Sam’s Chowder House, Tony G’s Pizza, and some other smaller operations, plus a really good variety of food carts for all kinds of delectables.

LIRA: Low Interest Rates Addiction LIRA: Low Interest Rates Addiction

Have we been suffering/benefiting from Low Interest Rates Addiction – or “LIRA” – for too long? This week, the US Equity Markets dropped notably, with the DOW down 832 points (3.1%) to and the S&P 500 down 3.3%, its 5th consecutive session of decline and longest losing streak in almost 2 years. The trend rippled overnight to Asian and European markets and futures show more drops ahead.

Most attribute the slide to a slow but steady rise in super-low interest rates. Those who saw the connection between cheap money and market volatility have been predicting the correction for some time.

When put in perspective the drop seems scary, but a slightly longer look back, reminds us that equity markets have soared over the past three years with the Nasdaq up about 35% from 3 years ago, even after this week’s drop.

According to the FED, you should expect to see more rate hikes over the coming 12 months in response to solid indicators of low unemployment, rising inflation and economic growth. The big picture may be better than you think.

The long view can also help: In the middle of 1981, a 30-year fixed rate mortgage was around 18.45%. Today it sits around 4.63%. The low was around 3.35% in 2012.

So as much as these rate hikes can be a bit alarming and cause notable equity market corrections, try to view them as the normalization of unrealistic rates rather than the headlines that speak of SOARING rates.

Buyers and sellers get jittery around these market corrections, but corrections in any market are an inevitability when markets soar. It is always best to pause and watch before drawing any big picture conclusions.

San Francisco Early Autumn Market Report

Due mostly to seasonal issues, median sales prices typically drop in Q3 from Q2 peaks, and did so this year as well. The median SF house price was up 15% and the median condo price was up 4% from Q3 2017. The other Bay Area counties also saw substantial year-over-year increases in median home sales prices in Q3 2018.

New Listings & Price Reductions
September is always a big month for new listings coming on market in San Francisco – typically with the highest number of the year – and this year they jumped 28% higher than in September 2017 to hit their highest point in years.

The number of price reductions in September also increased: 37% over 2017 and 18% over 2016. October is usually one of the two biggest months of the year for price reductions as sellers of unsold listings make a last attempt to grab the attention of buyers before the mid-winter slowdown begins in mid-November.

The number of active listings on the market on a given day in September was somewhat higher than last year, but a bit lower than in September 2016.

What will tell us most about where the market is heading is how buyers respond to these new listings and price reductions, and that information won’t be available until autumn’s listings have time to accept offers, and accepted offers have time to close escrow – in quantity – to give us their data. October is usually a very big month for sales in San Francisco as buyers jump on the surge of listings.

Bay Area Statistics by County

Jumps in listings and price reductions have been common around the Bay Area, and in some counties, the changes are much more pronounced than in SF: Sonoma saw a 122% increase in price reductions amid an active inventory of listings 90% higher than in September of last year. Santa Clara County saw staggering increases, but much of that is due to the fact that inventory was incredibly, abnormally low last year, when Santa Clara was perhaps the hottest real estate market in the country.

Days on Market, Overbidding &
Months Supply of Inventory

So far, we are not seeing significant shifts in these 3 standard measurements of market heat.

Price Tables by Neighborhood & Bedroom Count

Below are selected excerpts from 10 pages of tables breaking down SF home sales over the past 12 months. If a field is left blank, it signifies that there weren’t enough sales for statistical analysis; if a price is asterisked, it means there were only 3 or 4 sales in the period. We are happy to provide the full collection of tables upon request.

House Sales

Condo Sales

The Luxury Home Market

As with the general market, September is typically a very important month for new luxury home listings and October a big month for sales. For the past 3 years, October has been the biggest month of the year for luxury house sales of $3m+. Even more so than the general market, the luxury market goes into a precipitous slowdown from just before Thanksgiving to mid-late January.

It is impossible to know how median and average value statistics apply to any particular home without a specific comparative market analysis.

These analyses were made in good faith with data from sources deemed reliable, but may contain errors and are subject to revision. It is not our intent to convince you of a particular position, but to attempt to provide straightforward data and analysis, so you can make your own informed decisions. Median and average statistics are enormous generalities: There are hundreds of different markets in San Francisco and the Bay Area, each with its own unique dynamics. Median prices and average dollar per square foot values can be and often are affected by other factors besides changes in fair market value. Longer term trends are much more meaningful than short-term.

Compass is a real estate broker licensed by the State of California, DRE 01527235. Equal Housing Opportunity. This report has been prepared solely for information purposes. The information herein is based on or derived from information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. Compass disclaims any and all liability relating to this report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, the report. Nothing contained herein is intended to be or should be read as any regulatory, legal, tax, accounting or other advice and Compass does not provide such advice. All opinions are subject to change without notice. Compass makes no representation regarding the accuracy of any statements regarding any references to the laws, statutes or regulations of any state are those of the author(s). Past performance is no guarantee of future results.

© 2018 Compass

Iconic San Francisco Ferry Building Has Proud New Owners

Must feel pretty good to be able to outright buy one of San Francisco’s most beloved landmarks, the SF Ferry Building, with its iconic Port of San Francisco signage, and wedding cake clock tower. The edifice just changed hands again, going to Hudson Pacific Properties and Allianz Real Estate for $1086 per square foot with 268,018 square feet of office and retail space – for a total of $291 million. The seller was Equity Office, an affiliated offshoot of Blackstone, which bought the building in 2003

The Ferry Building originally opened in 1898 with its four stories and clock tower at the forefront of the Embardacero. So, it was pretty young when the great earthquake of 1906 hit SF. The building was restored to great fanfare in 2003. The first floor is dedicated to a bustling marketplace (popular with visitors and San Franciscans alike) and 14,000 commuters come and go by ferry Monday through Friday.

The way the deal works is special and complex as it involved a landowner, and two owners of the building itself. The land on which the building sits is owned by the Port of San Francisco. So, the land is leased to Hudson Pacific and Allianz, while they own the building itself. Hudson owns 55 percent and Allianz has 45 percent. The top three floors are office space. The last overhaul in 2003 cost $100 million.

The Multi-Unit Residential Property Markets of San Francisco, Alameda & Marin Counties

The big political issue facing the market is CA Prop 10, which, if passed in November, repeals the limits on local rent control laws enacted in the Costa-Hawkins Rental Housing Act. This would almost certainly have negative ramifications for owners of multi-unit residential properties in San Francisco and Oakland. The CA Legislative Analyst Office does a good job summarizing the issues: Prop 10 Review. Prop 10 is currently creating something of a shadow on the larger apartment building market, with some buyers waiting for election results – much as happened with SF Prop G did in 2014. (Prop G failed and the market rallied dramatically after Election Day.) However, the market certainly did not grind to a halt in Q3, nor did values plunge.

Historically speaking, it has been difficult for rent control measures to pass on a statewide basis, because homeowners, all of whom are potential landlords, outnumber tenants in California. On this issue, people tend to vote their financial interests, and homeowners generally vote in higher percentages than tenants. Strong rent-control measures are generally found only in tenant-majority communities. All of which is not to take for granted what will occur on November 6.

This report generally separates out the 2-4 unit and the 5+ unit apartment building markets, since they have different dynamics and values. All the statistics herein are broad generalities covering a wide variety of buildings of very different location, age, size, quality, condition, tenant profile, income and income potential. The number of sales in many of the segments is relatively small, which can make the statistics more prone to anomalous fluctuations.

Some charts pertain to multiple counties, and others drill down on statistics specific to San Francisco; some track the last 12 months of sales, and others have a final data point reflecting 2018 YTD sales. All numbers should be considered good-faith, general approximations.

Trends in Residential Rents

This chart below tracks longer-term average asking rent trends, instead of median asking rent appreciation since 2012, as illustrated in the charts above. It provides a bit more historical context.

Sales, Prices & Market Trends

2-4 Unit Buildings

5+ Unit Buildings: Inventory, Sales & Values

The inventory of active listings ticked up in the last 2 quarters.

SF 5+ Unit Buildings: Trends in Gross Rent Multiple,
Cap Rate & Dollar per Unit Value

Many of the standard value parameters have remained remarkably
consistent in San Francisco over recent years.

San Francisco New Construction Pipeline

Almost 70,000 housing units are now in the SF new construction pipeline. Plans are constantly being added, revised and abandoned, and new housing construction is extremely sensitive to changes in economic conditions.

Q3 2018 Sales of San Francisco 5+ Unit
Apartment Buildings

San Francisco is a unique residential-investment market: the buildings are smaller and older than in most places, built in a wide range of architectural styles. The great majority of the market is under rent control, which makes upside rental-income potential a big component of valuation, even if it is unknown when that potential might be realized. Within the city the variety in buildings and units is enormous.

In real estate, the devil is always in the details: If you are interested in further insight into the details of any of the above sales, or regarding properties currently on the market, please contact me.

Broker Performance in
Residential Multi-Unit Property Sales

In the summer of 2018, Paragon and Pacific Union merged into Compass to create the largest residential investment property brokerage in San Francisco.

It is impossible to know how median and average value statistics apply to any particular apartment building without a specific, tailored, comparative market analysis. Statistics are generalities: This is especially true for multi-unit properties, with the enormous range of property types, sizes, conditions, circumstances, qualities, financial data and locations. We are often dependent upon listing agents for income and expense details, which can be of varying accuracy. A percentage of investment property sales are not reported to MLS, which sometimes limits our ability for more comprehensive data analysis.

Compass is a real estate broker licensed by the State of California, DRE 01527235. Equal Housing Opportunity. This report has been prepared solely for information purposes. The information herein is based on or derived from information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. Compass disclaims any and all liability relating to this report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, the report. Nothing contained herein is intended to be or should be read as any regulatory, legal, tax, accounting or other advice and Compass does not provide such advice. All opinions are subject to change without notice. Compass makes no representation regarding the accuracy of any statements regarding any references to the laws, statutes or regulations of any state are those of the author(s). Past performance is no guarantee of future results.

© 2018 Compass