New Construction is Transforming San Francisco
New Construction Is Transforming San Francisco
The construction boom that ended in 2008 changed the city and its housing market. Condos now outsell houses in San Francisco. The South Beach-Yerba Buena zip code, previously a commercial area filled with parking lots, now has SF’s highest median household income. Mission Bay was born. And our skyline has been altered with dramatic, new high-rises like the Infinity Towers and Millennium.
That boom died with the 2008 market crash. But now with the city’s economy, employment, population, rents and home prices all surging to new heights, new home construction is booming again.
Will increasing numbers of newly built condos and apartments cool our overheated real estate market? One would think it would have to – eventually. But the large projects announced weekly can take years to turn into actual housing units. What if local high-tech industry, jobs and housing demand continue to grow alongside increasing supply? And our financial and real estate markets are influenced by so many complex, fluctuating economic, political and even natural-event factors, that it is very difficult to make meaningful predictions (despite how much “experts” love to make them).
One thing we can predict: San Francisco will continue to change in unexpected ways, and it will remain an extraordinary place to call home.
Much of the city’s new construction is occurring on parcels that were previously commercial-industrial, often on busy urban streets and/or in relatively neglected sections of the city – places that not so long ago might have been considered subprime locations for residential development. That has flipped 180 degrees: Wherever they are, most of these new projects are selling for prices rarely, if ever, seen before in their respective neighborhoods and bringing in new populations of typically young, affluent buyers. For good or ill, or both, depending on how you feel about this phenomenon, these developments are altering the cultures, demographics, commercial districts and home values of the neighborhoods they’re sprouting up in.
Perhaps the biggest common denominators of these properties are dramatic architecture, full service amenities (doormen and such), and the prevalence of spectacular views from many of the units. Eight of these properties didn’t even exist before 2000 and now they dominate the list of most expensive condo buildings in the city. Of course, excluding smaller buildings with only a sale or two per year rules out the vast majority of condo buildings in older neighborhoods, but it’s still astounding to see the impact of the previous construction boom on this market segment.
Even though the newer South Beach-Yerba Buena district dominates the list of most expensive condo buildings, older-prestige neighborhoods such as Pacific Heights and Russian Hill still have more luxury condo sales – for the time being. Though there is the odd high-rise, they’re typically in smaller, older (though beautiful) buildings, with a completely different architectural feel from the developments of the last 10 – 20 years.
The first golden age of SF apartment buildings – some of which were turned into condos and many of which remain rent-controlled apartments – was from 1920 to 1940: The units in these buildings are large, light, gracious and filled with elegant detail. Pacific Heights, the Marina, Russian Hill and Lake Street are filled with these buildings. Though there are beautiful apartments built in other eras (Edwardian flats, Art Deco apartments), the second golden age really arrived with the latest burst of new-condo construction since 2000: These units are ultra-modern and feature highest quality finishes and amenities. They are exemplified by the luxury, full-service high-rises of the South Beach-Yerba Buena area, though variations on this theme, in non-high-rise form, have been springing up all over the city. As seen in this chart, they command a premium in dollar per square foot value.
A residential district that didn’t even exist 20 years ago now dominates condo sales in San Francisco (and there are big, new projects still under development there). To a large degree due to the availability of large, developable (previously commercial) lots and higher-density zoning, new housing construction is now concentrated in areas such as the Market Street and Van Ness corridors, SoMa, the Mission, Hayes Valley, Dogpatch and Hunter’s Point – and often in previously neglected or distressed corners of such areas.
Income, Age, Homeownership & Foreign-Born Population by Zip Code
We recently completed a study of San Francisco's changing demographics by zip code and this is one of 7 charts and tables assessing income, age, education and other issues. This report has recently been featured in many local media outlets such as the Chronicle’s website, SFGate.com (where it became the most popular article of the day). We found it to be fascinating information and the full analysis can be accessed via this link: San Francisco Demographics Report
A glance at the last 20 years of San Francisco median home prices for houses, condos and TICs: Our recovery since 2012 has made up all the lost ground from the 2008 crash, and then some. Note that median prices are often affected by other factors besides changes in existing home values – new-construction condos hitting the market in large quantities, for example – and should be considered as generalities only. Still, the overall trend lines do illuminate the recent cycles in the city’s housing market. TICs are a relatively small portion of the market and their huge 2014 YTD surge should be taken in context: Just deleting 8 extremely expensive sales at 1100 Sacramento on Nob Hill drops the TIC median price by almost $50,000.
This report has focused on market-rate condo construction, but a more complete analysis that includes affordable, rental and social project housing construction can be found here:New Housing Construction in San Francisco