Inadequate Supply

Inadequate Supply, Emeryville, Lennar Multifamily Communities, Alliance Residential, Lowe Enterprises, Oakland, Polaris Pacific, Paragon Real Estate Group

Inadequate Supply, Emeryville, Lennar Multifamily Communities, Alliance Residential, Lowe Enterprises, Oakland, Polaris Pacific, Paragon Real Estate Group

Oakland strives to narrow housing supply gap as the region’s renters migrate east.

THIS ARTICLE WAS PUBLISHED IN THE ‘Q’ – THE REGISTRY’S PRINT PUBLICATION – IN OCTOBER OF 2016

By Jacob Bourne

[dropcap]O[/dropcap]f the 20,339 housing units in Oakland’s planning pipeline only about 79 were completed by Q3 2016. The pipeline data includes projects that have received entitlements, are in the entitlement process, or gaining building permits. The numbers could indicate an uptick in development with 769 units to begin during the remainder of the year and 7,537 units slated for ground breaking in 2017. By comparison, only 2,054 units will have begun construction by the end of 2016.

“I see this continuing until the next economic slowdown,” remarked Rachel Flynn, Oakland director of building and planning. “The main thing is that we’re not meeting the demands of job growth—it’s inadequate. Even if Oakland adds housing, if the region doesn’t keep up, then there’s a deficit and prices increase. It’s classic supply and demand.”

San Francisco, which has more than double Oakland’s population, has 34,010 units in the pipeline, not including 26,000 units for long-range projects targeted for mid-century completion, according to data from Paragon Real Estate Group. Oakland, conversely, has 4,901 units scheduled for completion in 2020 and beyond.

“I think a lot of the supply is apartments,” said Miles Garber, vice president of research, Polaris Pacific. “There are a few condos but the lion’s share seems to be multifamily apartments. There’s a split between what’s on paper and what’s going to be financed and built. When you boil it down to the projects that are actually financially feasible, the list narrows. If the developer is new to Oakland, that limits the list as well.”

San Francisco’s rental market, rising to a median of $3,440 for a one-bedroom, has become well beyond the grasp of many inhabitants, resulting in an exodus to parts of the East Bay. This in turn has driven up housing prices in Oakland. The median rent for a one-bedroom in Oakland is now $2,120. According to a Polaris Pacific report, Oakland and Emeryville’s mid-rise building prices have shown an annual increase of 24.2 percent to $518 per square foot. In San Francisco, mid-rise building prices are at $1,303 per square foot with only a slight decrease from last year.

“The one thing about Oakland is that it has reached the critical mass,” commented Paul Zeger, partner, Polaris Pacific. “People feel positive about living there. Some of the same people living in Oakland were in San Francisco two to three years ago. It’s a critical mass of like-minded people who enjoy the nightlife, visiting bars and restaurants. A lot of people are attributing it to a whole new demographic that started moving there five years ago.”

Much of the coming development is near BART transit centers and more walkable neighborhoods such as the Broadway-Valdez corridor, Downtown and Lake Merritt areas. Developers such as Lowe Enterprises, Lennar Multifamily Communities and Alliance Residential are hoping to commence construction on projects in these densely populated hubs once building permits are secured, potentially adding hundreds of housing units and retail opportunities within the next couple of years.

With Oakland’s rising housing costs, concern around the displacement of existing residents has intensified, however. In November, Alameda County voters will decide on Measure A1, a $580 million bond to support the creation of permanently affordable housing and homeownership assistance. Oakland residents will vote on Measure KK, proposed to fund upgrades to streets and public facilities with $600 million, of which, $100 million would be devoted to affordable housing preservation. According to Flynn, the city of Oakland lost $25 million per year in funding for revitalization efforts, such as subsidized housing and public infrastructure upgrades, when the Redevelopment Agency was dissolved in 2012.

“If you ever have the hope of buying real estate and raising a family, the East Bay holds the opportunity,” said Zeger. “I think the overall economic base of Oakland is pretty strong right now. Oakland already has all the infrastructure, BART for example, to support the growth that the Bay Area needs.” In order to advance itself as a viable alternative to other, more expensive geographies in the Bay Area, it has to commit to robust development, as well.

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