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EisnerAmper’s Real Estate Summit in San Francisco covered the “Battle of the Bay”, investment outlook, Oakland, and real estate developers.

The Real Estate Battle of the Bay

Some record numbers and some surprises featured prominently in the most recent real estate “Battle of the Bay” panel discussion. San Jose had a record 2018 with $2.7 billion in new real estate deals, up $1 billion from the previous year. Oakland has been strong as well for new deals in real estate for 2018, coming in second at $2 billion. In third place was San Francisco, as 2018 was the worst year since 2013 for new real estate deals.

This information came courtesy of the panelists at the May 2 EisnerAmper Real Estate Summit in San Francisco. The topic: “Battle of the Bay: East vs. West Real Estate Deals and Investment Outlook” featured insight from panelists Marshall Boyd, Co-President & CIO, Interstate Equities Corporation; Jim Farris, CEO, Mosser Capital; Bora Ozturk, General Partner, March Capital Fund; John Protopappas, President & CEO, Madison Park; and moderator Todd Hankin, Partner, EisnerAmper LLP.

The bottom line? There is a severe housing shortage in the Bay Area. In San Francisco, recent estimates report that eight jobs were added compared to one unit of housing. Currently, property values are at their highest; the Bay Area remains one of the most difficult climates for real estate development. Creating new housing remains the biggest challenge in the Bay Area.

On the plus side, the Bay Area is home to leading innovation and embraces change, being home to Silicon Valley and many of the largest technology companies. Conversely, the Bay Area real estate market is not innovative or open to change, leaving many real estate developers to wonder why it is so difficult to build in the Bay Area. Market factors do make it challenging for developers and this, in turn, makes it tough on consumers.

For example, San Francisco added 2,500 housing units last year, while adding 27,000 residents. Yet, the planning commission blocked nearly 50,000 real estate projects. In the desirable areas of the Mission, Noe Valley, Pacific Heights and others, there were only 137 approved deals. However, there were thousands of approved projects in areas such as Treasure Island and Park Merced. Small studios are selling well in San Francisco, because the price point is manageable.

In the Oakland area, specifically Montclair, there is a 35-foot height limit. For multi-unit housing, this will never work economically. One area of Oakland where new housing is being built is East Oakland. The area surrounding 98th Street and San Leandro Avenue has been undesirable for builders until recently. Madison Park is building townhouses at a price point of $750K, much lower than the Bay Area average.

A small group of people opposed to building projects near where they live (referred to as NIMBYs – an acronym for “Not in My Backyard”) are able to influence the Planning Commission in San Francisco by attending meetings and voicing opposition. They can cause delays and oftentimes even kill projects. In San Francisco, there is a perception that real estate developers are “the bad guy” causing gentrification and high prices. This causes NIMBYs to oppose new projects. In reality, if you believe in the law of supply and demand, more housing projects would help stabilize pricing and return to a demand-level housing environment.

As demographics play a huge role in real estate, a few thoughts regarding Millennials and Baby Boomers. Millennials are getting married later and having fewer children. They are less able to afford a Bay Area home. Baby Boomers are now moving into the rental market. They are downsizing and coming back to urban areas from the suburbs.

The Battle of the Bay title of the panel is an homage to sports rivalry. However, a central theme that surfaced during the discussion was that it's no longer the Battle of the Bay, but a Battle for the Bay that needs to happen—where investments are being made locally with the region's best interests in mind. Working together across the region will help support growth that's healthy and sustainable.


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Paul Bleeg is a Tax Partner responsible for overseeing tax compliance and planning in the firm’s Personal Wealth Advisors Group, as well as authoring tax research memorandums on various individual, partnership, corporate and non-profit issues.

Mr. Bishop is a Senior Manager in the Cloud Accounting Services Group, within our Outsourced Finance and Accounting practice in San Francisco. Utilizing cloud-based accounting solutions, he provides outsourced accounting services for small to midsized companies, startups, and family offices.