In this month’s Spotlight, we are going to compare two adjacent, yet very different real estate markets: San Francisco condominiums versus East Bay single-family homes. Our focus in San Francisco will be on District 9 which has the largest condo market in the city by volume. The district is in the central east portion of the city and comprises the neighborhoods of Bernal Heights, Inner Mission, Mission Bay, Potrero Hill, SoMa, Yerba Buena, South Beach, Central Waterfront/Dogpatch, and Treasure Island.
Much of the news coming out of the Bay Area recently has focused on San Francisco’s woes. Once the hottest real estate market in the country, San Francisco has experienced substantial challenges since the onset of the pandemic in early 2020. The city has been plagued by low office occupancy, a rise in perceived and actual crime rates, and tech market volatility among other factors. Since January, the monthly median price for a condo sold in District 9 has decreased by 7%.
Just across the Bay in Alameda County the picture is quite different. Since January, the monthly median single-family home price for Alameda County has increased by 25%. Why would two adjacent markets with similar price ranges behave so differently?
One theory is that the desirability of San Francisco condominiums is tied to the office vacancy rate. Since the pandemic and the growth of work-from-home, office vacancy rates have remained extremely high. This means not only are fewer workers looking for homes close to the office, but also fewer pedestrians are supporting restaurants, bars, and other retail storefronts. The result is shuttered stores, closed restaurants, and vacant streets. In other words, the two main drivers of demand for District 9 condominium sales—proximity to work and access to fun city activities—have dried up in the wake of the pandemic.
We can either wait for the office market to rebound, or we can work to convert a large portion of unused office space to residential use. With prices headed down, this is a bold proposition—but for apartment developers with a long-term approach there is a great opportunity to participate in the rebirth of San Francisco.
All information is from sources deemed reliable but no guarantee is made as to its accuracy. All material presented herein is intended for informational purposes only and is subject to human errors, omissions, changes or withdrawals without notice.
