By Daniella Soloway
Connect Silicon Valley brought together commercial real estate professionals from every avenue of the multifamily sector, from architects to developers, to discuss market trends, as well as topics facing the industry, such as housing, construction lending and regional growth.
As the market is late in the cycle and supply/demand is reaching short-term equilibrium, the panel shared ways to tackle affordable housing and where they’re looking to develop in 2017.
Last year, roughly 5,000 units were delivered, whereas this year, 3,500 are coming online. Silicon Valley is reaching short-term equilibrium in the upper-end market, but the demand for affordable housing remains high.
Highlights from the conversation include:
- Anton Development’s Andrew Baker shared that tax credits, which were at $1.10 -$1.15, are now moving downwards to $.90-$.95 because of the political climate and expectations of lowered tax rates to come. With this move, it’s harder to develop affordable housing, but with all these variables shifting, at least land prices are plateauing.
- Swenson’s Joshua Burroughs shared that the construction loan process slowed from 90-120 days process to up to seven months to complete. Regarding affordable housing, he said, “Cities are going to have to start at a local level in stepping up to the plate with creative policies or working with the county to approve developments.” He envisions a move towards higher density buildings to create a “24-hour city.”
- Simeon Commercial Properties’ Mike Kim argued that the capital markets and CRE development are incongruous. He said, “Capital markets is a drag. By the time development happens, we are at the peak of the market.” As opposed to Burroughs, he wants to start by creating an 18-hour city, arguing, “Downtown San Jose is poised to be something significant, it just needs more of everything- multifamily, retail…everything.”
- As an architect, MVE’s Darin Schoolmeester views affordable housing and market rate projects in the same way. But, to achieve overall efficiency, both the physical buildings and process need to be as cost effective as possible, which begins by “working with cities to make the process more predictable.” He also noted that parking is the most expensive part of a multifamily development; building it at ground level helps reduce costs.
Panelists also shared areas for their next developments:
- Baker- East Bay between Oakland and Fremont – there’s lower rent psf, but projects don’t have to be as dense, which, in turn means lower hard costs
- Kim- Silicon Valley and San Jose- market demand is based on demographics, and smaller square footage units are attractive to many
- Burroughs – South County- San Martin, Morgan Hill, and similar areas – single family homes. With a permanent shift to quality of life – including commute times – people are comfortable living in smaller quarters, meaning downtown core deliveries
- Schoolmeester – Santa Clara, San Mateo – transit-oriented developments
Connect CRE reaches the top players in the industry across all property types, as well as every discipline that contributes to the dynamic world of CRE.
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