The City’s proposed moratorium on housing back in February failed to pass by a 3-2 vote (a “supermajority” of 4-1 was required). This hasn’t stopped developers in our city from declaring a bit of a moratorium of their own. A moratorium on for sale housing in Emeryville. The Mark Company, a real estate marketing and sales firm, recently announced the completion of sales of Bridgwater Emeryville, the last “new” condominiums (really apartment conversions) in our city for the foreseeable future. There are now zero new condominiums under construction … or on the horizon. Zero, Zip, Nada, Zilch.
Originally called Emery Bay Club and Apartments, Bridgewater was built in 1988 with a condo map but were rentals for 20+ years prior. The condo map was implemented in 2007 but completion of the phased sales took eight years to sell out the 424-unit complex (including a two-year hiatus from 2009 to 2011 when the unsold units were lost to foreclosure). Priced between $170,000 & $290,000 in 2011, closing price for the one-bedrooms reached the low $400,000’s by the end of the sales cycle, with the most expensive two-bedrooms hitting the mid $500,000 mark. Over half the buyers were “Millennials”. A demographic designated as those reaching adulthood after the year 2000 and between the ages of 26 & 33. Another 25% were between 34 & 45 years old. Nearly half the residents are currently employed in San Francisco.
Bridgecourt, the tri-color stucco apartments along 40th that we recently wrote about, exercised an obscure clause to retain apartments instead of converting. The Oak Walk project at 40th and the forthcoming Sherwin-Williams are other projects that has opted for condo-mapping, but are resistant to establishing a timeline for implementing it. Are these developers just teasing us … or do they need to soak every drop of profit possible before they in fact convert? It seems if we expect developers to act on these condo maps, we need to get it in writing and not include any escape clauses.
Why all Apartments & No Condos?
This recent report by Polaris Pacific, a brokerage who specializes in market insights, details how bleak the condo market numbers actually are. While the Polaris map indicated 89 approved condominiums, this number is inaccurate because 87 of them are from the City subsidized affordable housing development at 3706 San Pablo and the other two units at 5532 Doyle Street have opted to go with rental units according to Planning & Building Director Charlie Bryant.
While there are currently 554 apartments underway in our 1.1 square mile city, the 55 square mile city of Oakland has barely 200. Yes, Emeryville has nearly 3X as many apartments under construction as all of the City of Oakland. We’ve stated many times before that every single new development within Emeryville is slated for 100% rental. Encouraging temporary citizenship, the “rentership society” shift and contributing to the affordability crisis that have put homeownership levels at a 20 year low. The smaller base of stable residents, the fewer children there will be to populate our forthcoming Center for Community Life school and the more we’ll need to rely on Oakland transfers to fill our classrooms (reported to be currently 40%).
According to City Attorney Michael Biddle, the city cannot legally required a residential project to be for sale units. In the Redevelopment era, the City was able to create financial incentives for developers to lean toward for sale developments but since it’s dissolution in 2011, we no longer have this valuable tool. As Councilmember Nora Davis put it “We have a carrot but we don’t have a stick”. The city seems to have identified this as a problem but have been slow to act thus far. “As part of the upcoming Planning Commission and City Council discussions on residential development, we will be looking at ways to incentivize ownership housing” according to Charlie Bryant.
A source familiar with the industry offered this perspective: “There is currently a valuation difference between rentals and condos of about 40% to the investor – which means investors CalPERS, the Electricians Union Pension Fund, the Carpenters Union pension fund, USAA or the teachers fund TIAA-CREF. These are public or public-responsive pension funds. Unions have encouraged the use of more-costly Union labor in construction by paying for it with their pension fund investments. One way to push for condo investment is to push the pension funds that serve municipal Emeryville to make those investments.”
“Coming up with capital is going to be the way to get the building type you want. The investment environment is very different from the condo bubble it was ten years ago. Back then there was cheap condo capital, cheap building insurance and 100% financing for consumers to make quick purchases and refi’s. That quick capital, isn’t there and so buyers are not there to drive valuation. Which gets at the other thing you could advocate for – a city backed low-interest, low down payment loan fund to assist home buyers who want to set down roots in Emeryville. That would provide stimulus to lending and make it much easier to buy rather than rent in our town. And it might influence more people who currently rent their existing investment condos to sell them to families who want to be homeowners.”
Another factor deterring condominiums is the obtaining insurance from defects that is required for new development which is more readily available for apartments complexes. Developers are liable for defects for 10 years after construction. If you’re at all familiar with the cycle of Emeryville developments, they are seemingly built overnight and then promptly covered in scaffolding and wrap within two years (something we’ll get into in a forthcoming post about needed tenant protections).
Further Reading & Resources:
The Mark Company Announces Completion of Sales at Bridgewater
The Mark Company, a leading urban residential marketing and sales firm, has announced the completion of sales at Bridgewater, a 424-unit residential condominium complex in Emeryville, California.
The Mark Company achieved an average of nine units sold per month, and increased prices by 40 percent over the life of the project, making it one of Emeryville’s fastest selling and most successful condominium developments. Closing prices ranged from the mid $200,000s to the low $400,000s for one-bedroom residences, and the mid $300,000s to mid $500,000s for two bedrooms.
Read More on The Registry →
Polaris Pacific: Oakland-Emeryville Condominium Market
Polaris Pacific is a new-condominium brokerage and advisory firm renowned for its grasp and insight into market trends and buyer sentiment in the major urban markets of the West Coast, and its ability to capitalize upon this information to generate sales performance. We produce monthly reports on six major urban markets on the West Coast—San Francisco, Los Angeles, Silicon Valley, Oakland-Emeryville, San Diego and Seattle—that provide timely insight into the performance of new and existing condominiums in these regions. We also generate comprehensive custom reports for specific multi-family development sites, including pricing and rental models, floorplan critique services, demographic analysis, and future supply projections by submarket at the request of developers and financial institutions.
Read More on The Registry [PDF]
Sold-out condo complex points to East Bay city’s allure for Millennials
By Marlize van Romburgh
Millennial buyers clamoring for relatively affordable condos near San Francisco snapped up more than half of the now-sold-out Bridgewater complex in Emeryville, SocketSite reported.
More than half of the buyers in the 424-unit complex were between ages 26 and 33, the website noted. Another quarter were between 34 and 45 years old.
The complex was originally developed as a rental property in 1988. Eight years ago, it was converted to a for-sale project. Between 2009 and 2011, the unsold units were lost to foreclosure.
Read More on SF Business Times →
Why no one is building condos in Oakland (and why there’s hope)
If a new Oakland condo was on your Christmas list, you’d have better luck finding a Princess Elsa doll. A whopping four unsold new condos are on the market in the East Bay, with no new projects under construction, according to a report released by Polaris Pacific this week.
Developers don’t want to play Scrooge, so what gives?
Prices aren’t high enough
Developers aren’t seeing high enough sale prices to justify the risky bet of building condos. Condos that have sold in East Bay mid-rise buildings recently have gone for about $500 a square foot — half of what they’d get in San Francisco. (Even in San Francisco, condo development isn’t keeping up with pre-recession levels.)
Read More on SF Business Times →
Oakland’s ‘lone builder’ unveils plans for three new market-rate projects
By Roland Li
Madison Park Financial, developer of the only new market-rate apartment building finished in Oakland last year, is seeking approval for three new housing projects totaling 230 units, another sign of increased investment and development interest in Oakland.
Read More on SF Business Times →