San Francisco CRE News | Calco Commercial, Inc.

Category: San Francisco CRE News (20)

Oct

Bay Area CRE News: 10/17/16 Week In Review

San Francisco CRE News:

California’s site-wide ballot measures could have reaching effects on the Bay Area

California voters will be facing a bevy of propositions this November ranging from legalizing recreational marijuana use to affordable housing measures. The San Francisco Chronicle has reported on a list of state-wide ballot initiatives that could potentially affect the real estate market and values in the Bay Area. Specifically, rent control measures Q & R in San Mateo and Burlingame, respectively, “could have a dramatic effect on the (Bay) area’s economy” by placing further restrictions on Property Owner rights and creating an “unaccountable” commission that would cost taxpayers “millions annually.”

Another tower to join the San Francisco skyline

The Transbay Terminal project boasts new transit connectivity, public parks, new retail, but is now also becoming a hub for new office tower development. BisNow reported on October 18, 2016, that a new “806 foot tall tower at 546 Howard Street” will join the ranks of the planned tower at 181 Freemont Street and the “Salesforce Tower.” The new tower at 546 Howard Street is slated to have ground floor retail, a 250-room hotel, condos and office space. According to the article, 546 Howard will be the “second tallest residential tower in the city.”

Transbay Terminal rendering showing the Howard Street site (transparent building) Registry

12,000 Jobs Coming to Silicon Valley

The Silicon Valley Business Journal, has reported the Beijing tech company LeEco, is slated to bring 12,000 jobs to the Bay Area. LeEco’s employees will operate from their “48-acre office complex in Santa Clara purchased from Yahoo earlier this year for $250 million.”

According to the tech firm’s website LeEco is “a leading global company born from the internet, (LeEco) seamlessly blends devices, content, applications and distribution in a first-of-it kind ecosystem.” LeEco believes in creating an “Eco Lifestyle” as referenced by its “vision to sell smartphones and TVS in the US bundled with easy subscriptions to its premium content.” LeEco was founded in 2004 by YT Jia.

LeEco

Oct

07

CRE News: 10/7/16 Week In Review

San Francisco CRE News:

Prop W to Raise Transfer Tax on Real Estate Sales

This November, in addition to the affordable housing measure (Prop U), San Francisco voters will also have Prop W on their ballots–otherwise known as the “Real Estate Transfer Tax on Properties Over $5 Million.” Authored by Supervisor Kim, the measure proposes increasing the rate of transfer tax on sales from a current rate of 2% to 2.25% on properties valued at $5-$10 Million; from 2.5% to 2.75% on properties valued at $10+ Million; and, from 2.5% to 3% on properties with a value in excess of $25 Million.

According to the Examiner, the transfer tax will not change on properties valued under $5 Million, which are currently taxed on a progressive tax schedule, with the lowest tax rate of “.68 percent for sales that are more than $250K and less than $1 Million.”

The majority of the Board of Supervisors support the Measure, but Prop W has its opponents as well, namely the San Francisco Apartment Association who fears the tax will have a negative impact on renters–in a city that already has some of the highest rents in the nation.

Related Article: San Francisco Business Times – Prop W

420 Taylor Street Sells for $45 Million

According to BISNOW, the 78,000+/- square foot office building located at 420 Taylor Street in Union Square has sold for $45 Million, or $576 a square foot.

420 Taylor Street Lobby

420 Taylor “previously was the headquarters for NBC radio affiliate KNBR … and was the first air-conditioned building in the city. It had a secret entrance from the Clift hotel so the celebrities could sneak into the studio undetected. The secret entrance still exists, but is no being used,” the article reports.

Slated Potrero Hill Development would transform industrial warehouse property into dorms for Students of CCA

Socketsite has reported that the corner of Arkansas & 17th Streets in San Francisco’s Potrero Hill neighborhood is planned for a full transformation from a single-story industrial building to a “building (that would) rise up to 48-feet in height” with ground floor retail, bike storage, and a multi-purpose room for students.

75 Arkansas Street

As industrial spaces continues to disappear in San Francisco as zoning designations change along with redevelopment projects, warehouse and production facilities may become even higher in demand–and/or manufacturers make be forced east and south seeking industrial product.

San Francisco Office Leasing Plummets in Q3

Roland Li of The San Francisco Business Times has reported that office leasing activity in San Francisco has fallen to “the lowest third-quarter activity since 2001.”

While this dramatic decrease may signal a major real estate cool down on the horizon, some industry experts believe the drop in activity is due to the “overheated” market in the past few years. Amber Schiada, director of Northern California research at JLL, is quoted as stating that she “expects rents to stay flat for the next year, but no major downturn (and that) people shouldn’t worry,” the article reported.

Because office rents have soared over the past consecutive 12 quarters, driven by start-up and tech giants leasing mammoth sized spaces, many other smaller office tenants have been driven from the city. Leveling rents brought upon by the slowdown in office leasing activity could “bring some relief for Tenants”, suggests Li.

Deutsche AM Acquires 35 Property Portfolio

Randyl Drummer of CoStar has reported that Deutsche AM has acquired 3.3 million square feet of industrial properties spanning from San Francisco to Chicago:

Deutsche Asset Management has purchased a 19-property industrial portfolio from International Airport Centers (IAC), with properties totaling 3.3 million square feet in seven U.S distribution markets.

The portfolio consisting of 35 buildings in the Los Angeles, San Francisco, Seattle, Dallas, Chicago, Portland and San Diego markets. The portfolio is 99% leased to 76 tenants, with an average tenant size of about 40,000 square feet.

Deutsche AM’s real estate investment business acquired the portfolio on behalf of an institutional investor through direct negotiations with Perlmutter Investment Co., the seller’s investment advisor. Deutsche did not disclose the sale price or other terms of the sale which closed Sept. 22.

“The portfolio’s geographic diversity across large distribution hubs and stable tenant base makes it an attractive investment,” said Todd Henderson, head of alternatives – real estate, Americas.

Deutsche Asset Management’s real estate investment business, part of the bank’s alternatives platform, had $53.6 billion in assets under management as of June 30.

Frankfort, Germany based Deutsche Bank AG, under pressure to shore up its weak capital position, has been advised by some analysts to sell the lucrative asset management business, which is said to be worth up to $9 billion.

Sep

23

San Francisco CRE News: Blackstone Investing Millions in Bay Area Industrial

According to The Registry, Blackstone is in the process of acquiring approximately 12 million square feet of properties with a $1.5 Billion price tag. Most of the properties being purchases are located in California, with a focus on Bay Area industrial product.

Sep

15

Week In Review: Bay Area & National CRE News

San Francisco Commercial Real Estate News:

Investors continue to pay record-setting prices to acquire San Francisco commercial buildings. The San Francisco Business Times reported earlier this week that One Front Street has sold for $521 million, equating to $800 per square foot.

Meanwhile, according to The Registry, 55 Hawthorne is slated to hit the San Francisco commercial market. The 143,000+/- square foot building is expected to earn $120-$125 million.

And in industrial news, the San Francisco investing continues–The Potrero Power Plant site is reportedly under contract between Associate Capital & NRG Engery. The San Francisco Business Times has reported that Associate Capital sees the industrial, but waterfront, property as “an unprecedented opportunity for infill development.”

San Francisco Tech CRE News:

As the Mission Bay Area continues to attract new tenants, start-ups and tech elites like UBER, a pillar in the tech world is also considering new digs south of the Bay Bridge: ADOBE. According to the San Francisco Business Times, Adobe Systems is eyeing 200,000+/- square feet in the 100 Hooper development–although no paper has been inked to date.

National CRE News:

And across the Atlantic, an investment fund has been created to target US multifamily properties. CoStar News has reported that Hansalnvest, based in Germany, has created a $500 million fund to invest in US Apartments. On the East Coast, Acadia Realty (based in New York) has created a $520 million fund targeting value-add retail investments, while San Francisco based Farallon Capital Management has raised $400 million to invest in commercial properties across the nation.

Jul

19

San Francisco CRE News: SF Property Assessment over $200 Billion

Source: San Francisco Business Times
By: Riley McDermid
Date Posted: July 19, 2016

According to the San Francisco’s Office of the Assessor-Recorder and the San Francisco Business times, the entire value of all properties in San Francisco has broken historical records by exceeding $208 billion. The total property value has increased by 9% over last year’s assessment, and will also mark an increase in the city’s tax revenues and General Fund budget.

Click here for the full article: SF Property Value

Jul

05

SF CRE News: Blackstone Acquires 555 & 575 Market Street

Source: BisNow News
By: Aswin Mannepalli
Date Posted: July 1, 2016

Blackstone has completed its acquisition of the 753k SF office properties at 555 and 575 Market St from John Hancock Real Estate. The company plans a major upgrade of the facilities lead by Equity Office, Blackstone’s wholly owned real estate affiliate, and hopes to relocate its Northern California headquarters there. The selling price was not disclosed.

The two buildings are 93% leased and count Uber, TIBCO Software, PNC Bank and Bank of San Francisco as clients.

“Beyond the strength of the tenant base in Market Center, the project’s timeless architecture, excellent views, irreplaceable central location and close proximity to public transportation were all positive factors affecting the acquisition,” said Equity Office Western Region managing director Frank Campbell. The new owner is planning to upgrade both buildings, placing an emphasis on improving common areas, adding more retail and fitness offerings, and sustainability. To attract companies looking for creative offices, Equity Office also plans to build new tenant suites.

Link to article: Blackstone

Jun

08

San Francisco CRE News: Voters Double Affordable Housing Requirements

Prop C–a controversial ballot measure that would require new housing developments to increase their “affordable housing” units from 12% to 25% has been passed by San Francisco voters.

What does this mean for the future of residential developments in San Francisco?

According to The San Francisco Business Times, developers and those groups opposed to the measure argue that additional requirements under Prop C will slow development and make housing more expensive, while supporters believe the measure will bring much needed affordable housing to a city where 64% of the population rents (source: Bay Area Census).

Jan

28

San Francisco Tech News: Yelp HQ building possible sale for $1000 a foot

Source: San Francisco Business Times
By: Riley McDermid
Date Posted: January 27, 2016

Landmark tech HQ building could fetch as much as $1,000 a foot in sale

The San Francisco landmark PacBell building could fetch as much as $1,000 square feet when it is sold, reports The Registry, a record price that points to how high office rents currently are – and the value they are bringing to commercial real estate sales.

At 286,092 square feet of office space and 9,000 square feet of retail, that could add up to $295 million for the building located at 140 Montgomery, which currently boasts tenants such as Yelp and Lumosity.

The Registry’s report posits those high rents that could drive up the sale price of the building, which Wilson Meany and Stockbridge Capital Group bought from AT&T in 2007.

“One of the reasons for the high sales price is the current condition of the rents in the property. The office building has rents that are closer to current market rents than any other office asset in the city at this time,” The Registry reports. “Should 140 New Montgomery achieve the $1,000 per square foot sale price, it would place the asset very close to replacement cost, which some sources in San Francisco have pegged to be close to $1,000 per square foot.”

“Yelp had signed an eight-year lease in 2011 to occupy nine floors in the building with an annual rental rate that began at $54 a square foot and is planned to increase to $66.41 a foot by the eighth year,” The Registry reports.

“The landlord granted an initial $5.8 million, or $60 a foot, tenant-improvement allowance, according to records filed by Yelp with the U.S. Securities and Exchange Commission. Lumosity signed a lease in 2013 to occupy 36,000 square feet, or three floors, in the building.”

Eastdil Secured, the listing agent for the property, didn’t return a request for comment from the Business Times. Wilson Meany confirmed to The Registry that the building is up for sale.

Link to Business Times Article: Tech HQ Could Fetch $1000 a foot in sale

Link to The Registry Report: 140 Montgomery

Jan

14

San Francisco CRE News: City Proposal Would Double Affordable Housing Requirements

Source: San Francisco Business Times
By: Roland Li
Date Posted: January 12, 2016

Supervisor Jane Kim will introduce a charter amendment today to more than double San Francisco’s affordable housing requirements for market-rate projects to 25 percent.

The change would require voter approval in the June election. The city currently requires market-rate projects to provide 12 percent of their units below market rate. Alternatively, developers can now build 20 percent of their units off site or pay a fee equal to 20 percent of the value of the units. Kim’s proposal also increases the off-site units and the fee to 33 percent each. The charter amendment would also allow the Board of Supervisors to make additional changes to the inclusionary housing policy without going back to voters by removing the existing policy from the charter.

The proposal is likely to spark a fight. Market-rate developers have argued in the past that increasing affordable housing requirements may result in less — not more — affordable housing since the costs could make some housing projects financially infeasible.

Urban think tank SPUR characterized Kim’s new proposal as “undoing the grand bargain” that established the Affordable Housing Trust Fund in 2012. Following the loss of state redevelopment funds for affordable housing, voters approved using general fund revenue to support affordable housing. In addition, the city lowered the affordable housing requirements to 12 percent for market-rate projects. Gabriel Metcalf, president of urban think tank SPUR, is critical of proposing new requirements without doing a study.

“It’s not a good idea to make up an inclusionary requirement out of thin air,” said Metcalf. “We have no way to judge what the right level would be right now. We should do an objective study to set the levels, not have one side re-set them to its liking whenever the political winds are blowing in its favor. Say what you will about the 2012 measure, but it had the involvement and concurrence of lots of different sides in the housing debate.”

Kim’s legislation broadly aligns with Mayor Ed Lee’s call to increase the affordable housing requirements, but he hasn’t proposed a specific requirement and had sought to work with developers to find a consensus.

But Kim called for immediate action. “With the ridiculously high cost of living in the Bay Area, our middle class residents are also vulnerable to losing their homes due to skyrocketing rents they can’t afford or by being pushed out of rent controlled buildings by the landlord. And most of them won’t be able to afford another place in the City,” Kim said in a statement. “This is an urgent step we can and should take now.”

Newly elected Supervisor Aaron Peskin is co-sponsoring the legislation and cites the 40 percent affordable housing numbers at Forest City’s 5M project and the San Francisco Giants’ Mission Rock as precedents for higher affordability requirements. “With Supervisor Kim’s recent successes negotiating unparalleled affordability requirements at Mission Rock and 5M, we know the market can bear it – and so do our constituents looking for relief,” said Peskin in statement.

However, those two projects aren’t indicative that the broader market can bear a higher affordable housing requirements, according to developers. 5M has 825,600 square feet of office space planned and Mission Rock has 1.3 million square feet of office space, which gives them additional revenue sources. The massive size of each project, with 5M’s 688 residential units and Mission Rock’s 1,500 residential units, also give them big enough scale to fund 40 percent affordable housing requirements. A small multifamily project would not necessarily be able to bear the cost of a quarter of its units, developers said, particularly if land prices didn’t fall in response to new requirements.

High affordability also hasn’t swayed opposition to 5M. Three neighborhood groups are now suing to block the project after it received city approval, alleging that the environmental impact study didn’t adequately measure the effects of the project.

Kim’s measure calls for new market-rate projects to provide 15 percent of units below-market-rate housing for renters making up to 55 percent of the area median income, or $39,250 for a single resident under the 2015 fiscal year definition. Rents would be no more than $981.25, or 30 percent, for such income levels. An additional 10 percent of units would be for those making 100 percent of the area median income, or $71,350 for a single resident, which would have rents up to $1,783.75 per month.

For-sale projects would have higher affordability thresholds, with 15 percent of units reserved to those making 80 percent of the area median income, and 10 percent reserved for those making 120 percent of the middle income.

Funding for affordable housing in the Bay Area has decreased due to the state’s 2012 elimination of Redevelopment Agencies and falling federal support. That lack of funding, in addition to an increase in housing demand and spiking prices, has pushed cities around the Bay Area to seek more concessions from market-rate developers. Oakland, San Jose, Berkeley and Emeryville have all moved to implement new fees or increase existing ones to fund affordable housing.

If the fee level is too low, as Supervisor Kim is arguing, the city is not maximizing its funding for affordable housing. But if fees are too high, there’s risk that market-rate development could slow and overall affordability could decrease as demand rises faster than supply, said Metcalf.

Supporters of the ballot measure include the nonprofit Tenants and Owners Development Corp., a prominent South of Market nonprofit, and the Council of Community Housing Organizations, which represents affordable housing developers and tenant advocates. They argue that the current requirement of 12 percent is outdated and that the city’s surge in market-rate construction can support more affordable housing.

“This is how public policy works. It changes and evolves to the circumstances of the time. The circumstances are totally different than 2011,” said Peter Cohen, co-director of CCHO.
Requiring 10 percent of units for residents making around 100 percent of the area median income would also provide much-needed supply for those who struggle to pay market-rate but make too much to qualify for most below-market-rate units, said Cohen. Kim’s proposal “ensures that market-rate projects will continue to provide a portion for middle-class households,” he said.

Link to article: SF to Double Affordable Housing Requirements?

Jan

14

Tech CRE News: Airbnb in Talks to Lease Former Dolby Office in SOMA

Source: San Francisco Business Times
By: Roland Li
Date Posted: January 14, 2016

Back in October, the audio giant Dolby Laboratories Inc. completed its move to 1275 Market St., heralding another tech arrival in San Francisco’s changing Mid-Market neighborhood.

With the relocation, Dolby (NYSE:DLB) vacated a 150,000-square-foot office at 999 Brannan St. in South of Market, and the building is close to being filled again. Airbnb Inc. is in talks to lease at least 100,000 square feet at 999 Brannan St., said three sources familiar with the property.

The pending deal is another affirmation that even as companies put up large blocks of sublease space on the market, suggesting a slowdown, other growing businesses are quickly snapping them up. Strong market activity, particularly from tech companies, has propelled San Francisco to become the most expensive office market in the country.

999 Brannan St. appears to be a natural expansion for Airbnb. The property is about a block from Airbnb’s current headquarters at 888 Brannan St., separated by Highway 80. The four-story property has a glass facade that wraps around its curving triangular structure, along with rooftop parking and a penthouse conference room, designed by Leddy Maytum Stacy Architects. The asking rent in the building wasn’t clear, but South of Market’s average office rent has surpassed $70 per square foot.

Dolby bought 999 Brannan St. from Shako Real Estate Management Inc. for $18.2 million in 1998, according to property records, but with renovations and a new tenant, the building would be worth exponentially more.,p>
Airbnb’s current location at 888 Brannan St. is evidence of the sharp jump in building values in the area. Last year, pension fund TIAA-CREF bought 888 Brannan St for $312 million from Beacon Capital Partners, a 69 percent profit on the $185 million that Beacon paid for the building in 2014. Airbnb leases 225,000 square feet, or more than half of the 400,000-square-foot building.

Airbnb, valued at $25.5 billion in its latest fundraising round in November, is the world’s third-most valuable private startup on paper, behind Uber Technologies Inc. and China’s Xiaomi Inc. The short-term rentals company also lobbied aggressively and spent $8.5 million to defeat Prop. F, a San Francisco ballot measure that would have added restrictions to its business. The company had around 500 San Francisco employees last year, according to Business Times research.

Jack Jackson of Tailwind Commercial, the leasing broker for 999 Brannan St., didn’t respond to requests for comment. A spokesman for Airbnb declined to comment.

Link to article: Airbnb Eyes Former Dolby Space

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