Peninsula Real Estate Primer 2020 / I

Peninsula Real Estate Primer Newsletter for Owners, Fiduciaries, Attorneys, and Financial Planners

Vo l. 2020/I

Market Trends

Single Family Condominium Multi-Unit Housing

Real Estate Tech

2020: the year of virtualization

Commercial Outlook Retail & Industrial

New Construction Revisited Bay Meadows

Vw o ln. t 2 0 2n 0 B/ u I rlingame Do ow

Peninsula Real Estate Primer Newsletter for Owners, Fiduciaries, Attorneys, and Financial Planners

Index

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Resi dential M arket Tren ds on t he Sa n Fran cis co Pe nins ula

10

Tec h in Re al Estate : 2020 as th e s emin al year

12 14 16 18

C omm ercial Real Estate : Sur veyin g retai l an d i ndustr ial Listi ngs : T he L and lord E xch ange N ew Co nstru ction : B ay Me ado ws Revi sited

Editor ’ s Note

Vo l. 2020/I

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Index

PREP 2020 / I Sources (1)

Residential: CAR.ORG 4/2020, MlsListings.com

(2)

http://www.sanmateocourt.org/documents/ court_news_and_notices/051820b.pdf

(3)

Multi-unit submarket : Costar.com 5/2020

(4)

https://www.marketplace.org/2020/05/21/california-housing-crisis-lowincome-tenants-renters-landlords-pama-management/

(5)

Commercial: Costar.com 5/2020

(6)

https://www.cityofsanmateo.org/3788/Bay-Meadows-Phase-II, https:// wilsonmeany.com/project/bay-meadows/

Notices While attempts have been made to provide accurate information, it may be subject to change without notice; nothing contained shall constitute appraisal; real estate, investment, legal, transactional or other advice; or an offer of any kind. Material is courtesy promotional in nature, for accredited investors and their advisors; it may be deemed advertisement. No warranties are given, whether expressed or implied. Not a solicitation for listed properties. No agency implied. Always rely upon legal counsel and qualified tax advice before making any real property transaction decisions.

Equal Housing Opportunity: we are an Equal Housing Opportunity provider, and comply with federal, state, and local Fair Housing laws.

Corporate DRE01943875, Broker DRE01337170.

Copyright Š Joseph Stein 2020. All images are copyrighted by the author. This is an original work of authorship.

Woodlake Anchor / Realty World Peninsula (650) 375-1596 office direct.

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Notices

San Fr

PREP 2020 / I

rancisco Peninsula Impressions View from Green Ridge Drive at Pointe Pacific HOA toward Daly City

5 Impressions

PREP 2020 / I Single Family Homes The valuation and buying of single family units has always been primarily affected by self-use buyers. However, homes have also attracted investors, as well, and after the great recession, an influx of institutional grade investors was added, with REITS buying up single family homes in the Bay Area by the thousands. Foreign investments also fueled local purchases, thus, the past decade has seen price support from several sources. SFH investor activity

Peninsula Market Trends

ceased as market gains caught up with historic pricing. Market watchers have been waiting for indicators of trend changes. 2019 saw such an indicator, with 2020 being in uncharted territory: due to the pandemic, home sales were down 48% in YTY comparison and -20.4 % year-todate, according to CAR’s 4/2020 market report.

At the same time, less inventory may have led

Sources (1)

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Articles

to the stabilization of prices at time of print.

PREP 2020 / I

Sources (1)

Condominiums Condominiums are the more affordable segment of single family units in terms of acquisition costs, and therefore often more attractive to first time buyers as well as individual investors in search of rental opportunities.

Ongoing higher carry of HOA dues as well as restrictions imposed by CC&Rs has traditionally led some investors to avoid condominiums in favor of multi-unit properties. However, when purchased opportunistically and at a well-run HOA, condominiums have proven to be an advantageous investment: while dues are an expenditure, they can be likened to operating expenses that are fixed and thus more predictable than those occurring at single family homes or multi-units.

Condominiums have seen similar value trends as single family units, however there has been arguably even more volatility in prices from 2007 to 2012 to the present.

Mutliple Factors With high rents and limited housing options

on the Peninsula, sales prices have not had the deterrent for individual landlords to purchase single rental properties, as would be expected purely looking at GRM. Also, value may have been locked in previously (for example, units are being purchased in 1031 exchanges), or properties may be part of estate planning, an exit of AB 1482 properties, or part of multiple use / multi generational real estate planning.

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PREP 2020 / I Multi-unit Housing

tenants, possibly for the near future. (2)

The multi-unit housing market has been im-

Hence, market projections of average rent

pacted by several developments in 2020: for one, the passing of AB 1482 in late 2019

San Mateo area submarket are forecasting

ushered in state-wide rent control for 5+ units apartment buildings. Secondly, the pandemic and the accompanying job losses

have created unprecedented uncertainties regarding the ability for vulnerable tenant populations to pay rent. Lastly, the tempo-

rates as well as sales prices per unit for the declines through 2021.(3) Low income housing seems especially hard hit throughout the state.(4) At the same time, such issues are less in plain sight in high-priced areas such as San Mateo County, where housing stock is

rary cessation on unlawful detainer action

diversified among longer term, smaller segments of landlords, and larger institutional

and resulting deferments of cases has created a different environment for landlords and

housing stock.

landlords holding newer, more expensive Sources (3)

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Uncertainties and Unknowns

Trends and Upsides

Some anecdotal evidence is displaying the

For San Mateo County (and the greater Sili-

human face of the crisis. Landlords are forgiving rent, making concessions, or arrang-

con Valley area, for that matter) growth stemming from technology companies has

ing for work-out agreements with tenants,

always supported demand for housing. The

who may be facing extreme, sometimes existential, hardships.

counties’ location is ideal for professionals and families who need to access employ-

Yet, the current landscape is ripe for confu-

ment hubs that may be at opposite ends of

sion, as the state, the counties, and the municipalities of California are finding them-

the Peninsula. The wave of infill construction along the Caltrain corridor has pro-

selves in uncharted territory with several

duced primarily high-end rentals that are

issues at once: the implementation of rent

still more affordable than San Francisco.

control, the pandemic-related emergency

Their availability seems to influence the

measures, moratoria or court closures.

housing stock in general, with various tiers

The projected rent rates seem to take this

of affordability remaining and continuing.

into account. Yet, the “check-mark� shaped

How long it will take to mend the overall

rebound projection may also be a show of

disruption, may very well depend upon a

faith in the resilience of tenants and noninstitutional landlords, that by addressing

national economic recovery. However, compared to other parts of the state and country,

this with the array of options and creative

our tech industries seem to assist and help

solutions, that they will weather this crisis together, however long it may be.

stabilize the residential market for now.

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Tech in Real Estate Tech and the availability of tech-enabled services has become the greatest leveler in any industry, allowing myriad options for operators both large and small.

The Battle over Consumers 2020 may be remembered as the year that brought the virtualization to the forefront of all industries, including the real estate industry.

While mobile search already had achieved dominance for consumers seeking housing options and real estate information, the importance of featuring properties online in a manner that allows consumers either to make reasonable preselections or to rent and/or buy remotely, have altogether become key elements in maintaining operations for many agents, sellers, and landlords, especially during shelter in place and social distancing measures. Virtual tours and virtually staged properties allow clients to preselect and narrow their real world touring to only

10 Articles

those properties that meet their criteria. Once adopted, it is likely that this trend may drive consumer behavior long after it is no longer a necessity, but now an expected convenience.

Business to Business applications Less visible are the battles in B2B, where established providers are seeing their dominance disrupted. In the property management software space, established companies (for example MRI and Yardi, to just name two) have seen more competition evolve. Leaner offices are using SaaS providers such as Buildium or Appfolio, enabling a host of process-model based solu-

tions. Also, newly designed systems often lack legacy routines, which can be liberating for users. Newer software architecture for wider user pools often requires less onboarding and enables the use of broader talent pools. These developments are not unlike the evolutions seen in the business data / crm environment, with a possible outcome being different providers settling on serving different client spheres.

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3D / virtual tours have become essential tools for the previewing and pre-selection of properties, and virtual staging is now an ubiquitous feature, both for sales and rental listings. Top image: virtual home tour on desktop viewer. Bottom image: virtually staged rental condominium. Images by the author.

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PREP 2020 / I Retail In today’s connected age, retail space is becom-

Commercial Outlook

ing somewhat optional—or at least less important than it ever was. Brick and mortar retailers were already weathering headwinds over the past years. As the nation has been seeing the temporary closing of malls and the shuttering of retailers, more uncertainty remains for landlords, tenants, investors and lenders alike. While this was already a challenge before the pandemic, shelter in place orders and the ongoing uncertainty has given retail significant blows. The economy's response to social distancing remains fluid and full effects are yet unclear, but “a severe pull-back” in new leasing and transaction volume for the interim is expected.

Sources (5)

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PREP 2020 / I

Sources (5)

Retail fares somewhat better on the Peninsula than

unaffected projections appear in the above chart

in many markets around the country: apparently, demolition and conversion of obsolete properties

regarding industrial occupancies. It seems that wherever roofers and car mechanics vacate, gam-

to higher and better use has kept inventory supply

ing firms and startups are moving in.

somewhat in check. Meanwhile, the metro's economic strength and population growth has led to

This may remain unchanged. The overall market

an increase in density, while income growth has

has seen needs from logistics, flex space, and bi-

provided an expanding consumer base with greater

otech tenants, as well as from smaller manufac-

purchasing power. Lastly, the trend of retailers ca-

turing in the Peninsula’s industrial parks. Lack of

tering to higher-income demographics continues to

available zoned land and infrastructure, as well

grow.

as severe supply constraints keep vacancies in check and fundamentals comparatively steady.

Industrial

The market's demand drivers and growth are ap-

Anyone who has witnessed the conversion of oldtime construction and automotive service spaces into tech spaces throughout San Mateo and the Silicon Valley can appreciate how relatively

pealing, but it's relatively limited inventory mutes sales. Pricing is above the national average, and cap rates remain low, but may face pressure as lenders take caution amid a pandemic induced recession.

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Upcoming Listings Our Landlord Exchange Page

From our managed units inventory—from landlord to landlord At time of print, these properties are becoming available: some may be vacant, others may be tenant occupied. Let us know if you are interested in acquiring additional rentals, call (650) 375-1596. Properties can be acquired with tenants in place or purchased when vacant and - if desired - re-rented at that time.

2 Bedroom / 1 Bath SFH —330 Cavanaugh St, San Mateo Anticipated List $1,050,000 Type: single family 2 bedroom / 1 bath Approx. size: 870 sq.ft.

This property has been a rental since 2015 and has been vacated, with large lot that adjoins large PG&E lot in the Shoreview neighborhood. Recent state ADU legislation has made it easier to add Accessory Dwelling Units (ADUs) to existing housing inventory.

Notice: Anticipated list prices are based on comps at time of print and other considerations, and are subject to change and market conditions at time of listing on MLS, and may vary, no warranties given.

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Exchange

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Individual Condominiums (Woodlake HOA San Mateo) Properties are part of Woodlake Association, an approximately 26 acre, 990 unit count, master-planned, award-winning condominium project on the north side of San Mateo, in walking distance to downtown Burlingame.

845 N. Humboldt Street Anticipated List $525,000 Type: Studio approx. size: 493 sq.ft.

Current rent: $1,950 monthly HOA dues: $329 Term: vacant in June 2020 928 Peninsula Avenue Anticipated List $645,000 Type: 1 bedroom approx. size: 693 sq.ft.

Current rent: $2,450 monthly HOA dues: $458 Term: month to month beginning July 2020 801 N. Humboldt Street Anticipated List $595,000 Type: 1 bedroom approx. size: 693 sq.ft.

Current rent: $1,750 monthly HOA dues: $458 Term: month to month beginning July 2020 827 N. Humboldt Street Anticipated List $855,000 Type: 2 / 1.5 townhome approx. size: 1151 sq.ft.

Current rent: $2,800 monthly HOA dues: $652 Term: vacant in June 2020

15 Exchange

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New Construction Revisited Bay Meadows, San Mateo Impressions from a long-term redevelopment project With over 20 years in the making, Bay Meadows has been converted from a former race track to a significant and successful neighborhood in San Mateo.

The blended mix of residential and commercial properties - along with acres of master-planned open space and the Nueva School campus - can be touted as an urban planning success. Construction in phase II is still ongoing, however the established ecosystem of housing, office space, retail, and parks has been very well received.

The retail includes upmarket ice cream and coffee shops. The outdoor Fieldwork microbrewery has become a focal point of the neighborhood, drawing crowds from the cluster of offices and surrounding neighborhood residences alike.

Meanwhile, Bay Meadows Park has become an established location for AYSO youth soccer games throughout their busy seasons.

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Images by the author. Sources (6)

Metrics Site Size:

80 acres

Residential:

1,000 units

Office: Retail:

780,000 square feet 40,000 square feet

Public Parks: 18 acres

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Editor’s Note As architect Mies Van Der Rohe once stated, less is more.

This publication intends to share less, but better, information with our clients and our network in San Mateo County. With a constant acceleration of technology and news cycles, the need to remove the noise and to just share what is important is now greater than ever. What better time to create this newsletter than during this moment of reflection and deceleration? Perhaps you will find this infor-

mation helpful. Your feedback is most welcome.

Our team serves over 200 property owners & families on the Peninsula with the leasing, management, maintenance, and the listing and selling of their properties. We service multi-family, condominiums, single family, estates, and commercial properties. We work with individual owners, with groups of owners, with attorneys, with fiduciary services, with family offices, and with advisors. Our clients are diverse: from individual owners of one rental to multi-property family portfolios; from single beneficiary trusts to groups of investors or beneficiaries; from novices to accredited investors. And all of our clients goals are the same: diligent personal attention to property management and real estate services, and stewardship of their properties. Our local stewardship & service began in 1987. Some

clients have been with us since inception and some are now with us in second generation.

My hope is that this concise publication gives you more: more of all the services that we provide and that you already have grown to know and love. Whether leasing & property management, listings & sales, pro formas & broker price opinions, development & usage ideas — we cover the whole spectrum, and all of the Peninsula’s real estate. And we are always here for you.

Joseph Stein, Broker / President DRE01337170 Realty World Peninsula | Woodlake Anchor broker@myregroup.com (650) 375-0640 direct (650) 375-1596 office Property Management: www.woodlakeanchor.net Real Estate Sales: www.rw650.com 520 Peninsula Ave, San Mateo, CA 94401 Corp. DRE01943875 Accredited Residential Manager I.R.E.M., Member C.A.R., N.A.R., SAMCAR, CDAR, BBOAR

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Editor’s Note

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We want you to enjoy every article we wrote.

Who knows? One day you might be inspired by our content. Every article is a product of hard work & passion that our team always brings towards creating every issue. On behalf of my team, thank you for your continued patronage.

Today’s highlight is an award-winning, passive solar high-rise project. The urban setting for this design creates a dynamic interchange between existing buildings and new architecture, juxtaposing the main high rise against perimeter buildings and the urban fabric. At 240 feet height, the slender floor plan is clad in a dual window / triple glazing envelope with air space that works as a conduit for natural ventilation in the summer (removing solar heat gains) as well as a warming buffer during the winter. The glass enclosed elevator shaft creates a visible landmark both during the day as well as at night. Winning a coveted design award in 1998, its clean architecture, energy concept, and passive solar design is still forward-looking in 2020. [Š Joseph Stein, design by the author.]

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Highlight

Sender: Woodlake Anchor / Realty World Peninsula 520 Peninsula Avenue, San Mateo, CA 94401, USA

Pe n i n s u l a Re a l E s t a t e P r i m e r Newsletter for Owners, Fiduciaries, Attorneys & Financial Planners A publication by Realty World Peninsula & Woodlake Anchor, C. Joseph Stein, Broker / President DRE01337170 520 Peninsula Avenue, San Mateo, CA 94401, USA +1 (650) 375-1596 direct | www.rw650.com