Outsiders in Bay Area Capitalize on Region’s Growth

Bay Area Council, San Francisco, Bay Area, East Bay

San Francisco Panorama 3

By Neil Gonzales

A red-hot real estate market in the San Francisco Bay Area largely fueled by the technology sector is increasingly drawing corporations and investors from across the country and overseas. These outside players from Houston-based real-estate services firm Transwestern to the private investment company Hayah Holdings in the United Arab Emirates and even Vanke, the biggest developer in China, are looking to expand into and capture part of the tremendous economic growth happening in the Bay Area, particularly from San Francisco to Silicon Valley.

The San Francisco and San Jose metropolitan statistical areas are among the regions nationwide that “have the jobs of the future that are growing, and so that’s where we want to ride our horse,” said Ed Del Beccaro, a managing director for Transwestern, which has been expanding its locations as well as service lines from rental investments to health-care properties in the Bay Area since the firm established a presence here about 18 months ago.

Those jobs are in “biotech, computers, social media, digital design and medical,” Del Beccaro said. “All those things are in those cities. They are also the cities that tend to be port cities, major-hub cities or energy cities.”

In San Francisco, all the new office construction and leasing activity—from the likes of microblogging leader Twitter and mobile-payment company Square with their new expanded headquarters—just reflect an almost-unrestrained optimism in a continuing upward trajectory in Bay Area jobs, population and commerce. According to Transwestern, the San Francisco office market ended the second quarter this year with a positive net absorption of more than 1.1 million square feet. That translates to more than 28,000 workers still needed to fill all that space based upon 135 square feet per employee.

Anton Qiu, an investment consultant with Northern California-based Tri Commercial real estate brokerage and property management firm, believes those 28,000 will come despite a housing crunch and the high cost of living in San Francisco. “So many of these tech companies are looking for tech workers,” Qiu said, “so a lot of college grads are getting paid well and are able to afford” to stay in San Francisco.

Jeffrey Hoopes, chief executive officer of San Francisco-based Swinerton Builders, agreed: “These young folks want to live in the city, where they are close to events and concerts. It’s the lifestyle that’s drawing the growth.”

Companies and investors from beyond the Bay Area are following where these workers are going, spurring office and residential projects in the local region. Hoopes said he is seeing a lot of national real estate investment trusts such as AvalonBay Communities Inc. from Washington, D.C., and Chicago-based Equity Residential jumping into the Bay Area market.

Then there are the Chinese investors. In the last few years, Qiu said, they have shown a “huge appetite” for the Bay Area market, starting with small residential developments and now including large-scale housing, commercial and retail projects.

Qiu noted that one of those big projects involves a partnership between China’s Vanke and New York-based developer Tishman Speyer: a 655-unit, high-rise condominium at 201 Folsom St. in San Francisco. The estimated $300 million joint venture represents the first North American investment for Vanke.

Other Chinese interests “are scouting deals in office buildings and hotel projects,” Qiu added.

External forces are also motivating Chinese and other Asian firms and investors to venture into Bay Area real estate. In China, “a lot of the major markets have hit a bottleneck, so companies there are looking overseas to diversify their projects,” Qiu said.

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