Market demands shift residential developers’ priority list.
THIS ARTICLE WAS PUBLISHED IN THE ‘Q’ – THE REGISTRY’S PRINT PUBLICATION – IN OCTOBER 2015
By Naib Mian[dropcap]A[/dropcap]s housing developers across the Bay Area adapt to residents’ changing needs, many are refocusing their designs to include features such as more amenities that are attractive to a younger generation of technology professionals.
“Almost 100 percent of our residents are working singles and couples,” said Jeff Smith, senior vice president of residential development at San Mateo-based Sares Regis Group of Northern California, which develops and manages a variety of residential real estate.[contextly_sidebar id=”qGDEVMctLuzaPWDhRaNK4MFZTUxhGRB4″]This influx of a wealthy workforce has driven up prices, posing challenges for a market that is increasingly restricted in access, according to Paul Zeger, partner at the San Francisco-based residential sales and marketing firm Polaris Pacific.
“There’s a bifurcation kind of like we’re seeing with the widening income gap,” Zeger said. “Lower-income people are struggling to find housing and are looking for more efficient units that cost less. Those with more money are paying premiums for something that’s larger. High end is going bigger and entry level is going smaller.”
Across the board, however, multifamily residential developments are offering more amenities, from fitness and concierge services to pet care. “The trend you’re really seeing these days is these buildings are more like luxury hotels and resorts with full service amenities starting with the entry experience,” Smith said. “Gathering spaces are really important as social places where people can grab coffee and interact.”
These types of communal spaces are becoming more prevalent across commercial real estate as sites of community building or collaborative workspace. “Common areas are expansive, both indoors and outdoors,” Zeger said.
Similarly, the environmental design changes throughout the commercial real estate industry are also affecting residential construction.
“Sustainability is very important. For the most part, everyone is going after some sort of LEED (Leadership in Energy and Environmental Design) certification,” Smith said. “California and the Bay Area have taken the lead in being on the forefront of sustainability with the [state’s] new Title 24 energy standards,” which aim to reduce energy use. Sares Regis has incorporated water conservation and a storm water component into its construction in response to the regional drought challenges, but Smith said that environmentally friendly design also could take the form of “fun amenities,” such as electric vehicle charging stations and bike shares.
This has also meant less car dependency—what Smith called “breaking out of the historic automobile-focused trend.” In an attempt to reduce that dependency, newer developments are devoting fewer resources to parking. “It used to be a one-to-one ratio, but these days your best case is two cars for every three homes or 50 percent come with parking.”
That dependency has never affected urban environments very much, but development is limited in San Francisco, where Zeger said building is taking place anywhere there is available space, which is currently in the Transbay, Mission Bay and Candlestick Point areas. With average condominium prices in those districts at about $1,000 per square foot, according to a Polaris Pacific report, many people are looking for housing elsewhere in the Bay Area, he said.
Transportation along the Peninsula, for example, is a major concern as many residents are finding themselves living somewhere between San Francisco and Silicon Valley. Shifting away from automobile-based travel, developers are looking to build along major transit routes.
“A few years ago all of the high density was in San Francisco, but now you’re seeing higher concentrations in Oakland, San Jose and at all the BART and Caltrain stops,” Zeger said. These transit hubs allow easier access to both amenities and workplaces, a growing demand among millennials looking to blend together living with working and shopping. “They want flexibility and ease for commuting—being able to get to work and services easily,” Smith said.
Many of these transit hubs are in small downtowns as well, where restaurants and retail are filling in following the rise of residential developments, providing an external set of amenities for residents.
“It’s all about convenience,” Smith said. “People want to be able to walk out and do everything they need to do without getting in the car.”
This transit orientation and rise of mixed-use spaces around residential developments is characteristic of the wider commercial real estate market. As a new generation of consumers demands these shifts—away from cars and towards both a more sustainable and interconnected lifestyle—all sectors of the market are responding, industry experts said.