Peninsula Real Estate Primer

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

residential & commercial market review | 2022 outlook 202I Edition

Peninsula Mandalay, South San Francisco

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

Index

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S a n Mateo Real E state M arket Outl oo k

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C omm ercial Real Estate In San F ran cisco

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W hat C ovi d Ta ught U s In Op e ra o ns & M arke ng

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T he Pri mar y Reas on for S eco nd H ar vest : L ocal Fo od Ins ec urity

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Proj ect D evel opm ent Upd ate : N etZe ro water ge n era on

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Editor’ s Note

V2 o1 l. 2020/I 20

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Index

San Fr

Sources Images: (1 –3) Costar, licensed use to Realty World Peninsula. Second Harvest Images by Second Harvest. SKYH20 Images © Joseph Stein, original work of authorship. Information sources include Costar, licensed use.

Notice While attempts have been made to provide accurate information, nothing contained herein shall constitute or be warranted as an appraisal; or real estate, investment, legal, transactional or other advice; or an offer of any kind. This material is intended as courtesy promotional material only, for accredited investors and their advisors, and 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.

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No ces

rancisco Peninsula Impressions Holiday Lights at Filoli Gardens

5 Impressions

PREP 2021 In a nutshell, the pandemic storm seems to have

Mul -unit Outlook San Mateo Submarket — Family Multi-Unit

been weathered, at least its worst parts (see also graphic below). This is good news for landlords.

Despite the record exodus of tenants on the San Francisco Peninsula during the course of the pandemic, after the end of lockdown and during the course of 2021, the need for homes in San Mateo/ Burlingame grew organically as a result of arriving technological businesses. In comparison to San Francisco, all of 2020's moderate occupancy losses in the submarket have already been regained.

Many local tenants had left due to the move to remote work. To exasperate the impacts of the demand outflow, a significant quantity of extra housing supply was delivered in late 2020 into the weaker market circumstances.

Since renters returned in anticipation of in-office work, vacancy peaked last year and has essentially

Source (1)

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trended at its historical average. Since 75% of the

PREP 2021

Source (2)

apartment inventory is rated at 1 or 2 stars, ask-

rent levels plateauing in 2019.

ing rentals in SanMateo/Burlingame are slightly lower than the San Francisco metro average of

Greater San Mateo County: due to the minimal

$2,950 per unit. Thus, the submarket average is

inventory that exists in the outlying areas of San

lower, but the neighborhood offers a premium,

Mateo County, small changes in absorption can

with an average of $2,370/unit, which is higher

lead to large fluctuations in vacancy, which may

than the metro's $2,280/unit average on the

skew the impression of the submarket. The out-

equivalent low-end.

lying areas of San Mateo County typically trend below the metro average. Vacancy is currently

San Mateo and older Burlingame's inventory is in

prevailing at an estimated 7.7%.

high demand from price-conscious tenants squeezed by high housing costs and the area's

Our experience has been that overall individual

rising population, yet recent job losses resulted

vacancy rates in San Mateo reflects corporate

in a temporary outflow and a rent drop in 2020.

hesitancy to request a full return to offices.

As the previous decade came to a conclusion,

While trends are looking overall brigher, we

same-store rent growth had slowed, possibly due

anticipate this phase will last through 2022/23.

to increasing competition from new supply, with

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PREP 2021

Construction Construction San Mateo/Burlingame MultiFamily Development activity ramped back up recently yet remains measured. Over the past year, 280 units have been delivered, while 642 units are currently under construction. New properties feature amenities to attract high-income renters, who may consider these luxury units a deal when compared to new apartments in Mission Bay

Notable recent completions include Station Park Green, which features amenities such as quartz countertops, stainless steel appliances, walk-in closets, a community pool, fitness center, and dog wash area. Station Park Green's final phase delivered in March 2020, bringing the complex to a total of 492 units. Anson, a new 268-unit complex developed by Summer Hill Housing Group at 108 Carolan Ave just over a block from Broadway Station in Burlingame delivered in Novem-

and SoMa in S.F. Source (3)

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PREP 2021

© Joseph Stein

ber 2020 into a slower leasing environment

In taking from the playbook of developers,

but achieved over 60% lease-up. The largest project underway in the submarket broke

our landlords are achieving better lease-

ground in 2021. Windy Hill Property Ven-

every vacancy turn, resulting in more favor-

tures, 1325 Old Country Rd - Artisan Cross-

able lease terms and higher quality tenants.

outs by updating their older properties at

ing will bring 250 units to market in a few years.

Roughly 2,000 market-rate apartment units have been completed in the submarket over

Uncertainties and Unknowns

the past decade, representing a supply increase well below 10%. San Mateo predomi-

While neither property owners nor renters

nantly contains an older stock of inventory

know what the future holds in store, certain

that was built in the 1960s or earlier. Recent

trends have been emerging during the past

apartment development has been concen-

months that give reason for cautious opti-

trated close to Highways101 and along the

mism. While the urban center of downtown San Francisco continues to see difficulties in

El Camino Real (SR 82), a stretch that can appeal to local workers as well as commuters heading to Silicon Valley or San Francisco, however lacking the space and quiet of older developments.

its commercial sector, the Peninsula is perfectly poised to serve the changes and shifts in working and living patterns.

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PREP 2021

Commercial Outlook San Francisco Submarket

San Francisco’s office market is one of the Bay Area’s major indicators of commercial activity in general —its office sector sustained extensive losses during the pandemic, but signs of a return to stronger market conditions are finally materializing as the year progresses.

© Joseph Stein

Sublease space has retracted since the springtime, leading total availability lower in Q3 for the first time since the pandemic hit. Furthermore, leasing recently rebounded close to pre-pandemic levels.Pre-leased construction deliveries concentrated in the Peninsula pushed net absorption into positive territory in Q2 for the first time since the pandemic hit, but vacancy continued to rise with supply growth outpacing the occupancy gains.

Tech firms have been leaders in announcing longer-term mobile work options. For example, the city's largest employer and occupant, Salesforce, recently canceled its pre-lease of a yet-to-be-built tower. The company also offered half of one of its existing office buildings for sublease, as it plans for the majority of its workforce to

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PREP 2021

© Joseph Stein

come into the office one to three

working from home will remain an

days a week. A Bay Area Council sur-

option indefinitely.

vey of CEOs in 2020 found that al-

Several banner deals closed over

most a fifth of companies are plan-

the past few quarters propping up

ning to transition to full remote pol-

sales volume in the investment

icies and 89% are planning at least

market. Institutional investors are

partial remote work policies.

still active, but overall deal velocity

Twitter and Square announced that

is down to a decade-long low.

Ar cles 12 Impressions 11

PREP 2021

What Covid Taught Us

Preparedness is Key When the lockdown hit, thankfully we were already prepared: as early adpoters to sheltering our office in place, we were able to remote work most of our operations. As an essential services provider, we were able to keep operating with rigorous safety protocols in place, which will remain through 2022.

Due to our adoption of SAAS services, VOIP, and a roll out of our remote work platforms, we were able to operate seamlessly as a small business. And even after the mandates were lifted,

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PREP 2021 we have kept consumers, clients, and staff safe by continuing to adhere to hygienic procedures adopted during shelter in place and following industry recommendations. This continues to benefit our landlord’s properties and showings.

Putting Social in Social Media

quality virtual tours have become key qualifiers for tenants and buyers alike to investigate housing options.

Besides our syndicated property tours, which originate form our website and syndicate to dozens of websites—including Zillow, Trulia, Apartments.com, and many others— our YouTube channel has been invaluable. Recently, we have broken over 500,000 views, which is quite a feat.

Also, our early adoption of social media tools proved to be invaluable during the

In a world of instant gratification and the

lockdown and the consecutive months: as

“competition for eyeballs”, our media

property seekers were ever more hesitant to view properties in person, our high

presences will remain the new normal, for the benefit of our clients.

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PREP 2021

The Primary Cause for Second Harvest Food Insecurity on the Peninsula The Bay Area in general and the San Francisco Peninsula in particular are noted for being affluent. Poverty appears on the margins and certain effects of it – most notably hunger – are hard to see.

Yet, especially food insecurity has become a big issue for a growing number of families and individuals on the Peninsula. This is where the non-profit Second Harvest of Silicon Valley, has become a life-line for many.

Even before COVID-19, Second Harvest was responding to a level of food insecurity in Silicon Valley that indicated there was already a crisis, providing groceries to a record number of clients every month. The economic crisis created by the pandemic has pushed many families deeper into poverty and caused others to seek food assistance for the very first time.

Second Harvest now serves 450,000 people every month.

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PREP 2021

This is an incredible 80% increase over prepandemic levels.

Since Bay Area counties were ordered to shelter in place, Second Harvest has been on the frontline every day making sure that anyone who needs nutritious food can get it. As the need for food assistance has exploded, Second Harvest and other like-minded non -profits in general have also had to quickly overhaul operations to implement social distancing protocols to keep clients, volunteers and staff safe, while dramatically increasing distribution of goods and services. All this comes at greater costs, while some traditional avenues of donating have been trickling or had to be discontinued. However, the continued support of such institutions as Second Harvest is critical because of the anticipated elevated and significant need for food assistance to stay steady for years to come.

Please consider donating and contributing to Second Harvest of Silicon Valley. Please donate, volunteer, create a virtual food drive, and use your social media presence to spread the word about food insecurity and its solutions providers in Silicon Valley.

Second Harvest, 750 Curtner Avenue, San Jose, CA 95125 Phone: 408-266-8866, Fax: 408-266-9042 www.shfb.org

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Real Estate & Proj Atmospheric Water: SkyH2O While our core business is serving our over 250 mid– to high net individuals, families, trusts, real estate partnerships and fiduciaries, we also engage in project development and real estate advisory.

Joseph Stein’s most recent advisory involves SkyH2O—a California innovation company with German engineering heritage that provides world-class industrialgrade water generating systems (AWGs).

Joseph has been designing both SKYH2O’s Irvine headquarters as well as their production facilities.

SkyH2O has invented groundbreaking, advanced and proven AWG technology engineered for commercial, industrial and government applications, producing water in increments of 10,500 liters/day (2,775 gal/day), with an expected life of +25 years.

Pre-engineered AWG projects start at about 30,000 liters/day (8,000 gal/day),

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Project Development Desk

ject Development: SKYH2O Advisory Contributions In Fighting The Water Crisis

© Joseph Stein

© Joseph Stein

and can be deployed in a distributed manner, specifically where water is needed most, including at/near existing reservoir infrastructure enabling – “Water 4.0”.

Both the HQ site as well as the widely deployable production and distribution centers use NetZero technologies and aim to be efficient, modular, and differentiating in its formal qualities, while reducing footprint through water catchment, solar & wind power integration. Facilities feature distribution of water to commercial end users and consumers alike, as well as EV– charging stations, as well as retail applications for micro-wateries, as well as bottling and distribution.

Images above: SKYH2O distribution center.

Image right: Skyh2O headquarter building.

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Project Development Desk

© Joseph Stein

© Joseph Stein

PREP 2021

Editor’s Note.

This time of year, Filoli Gardens are dressed in full Holiday lights.

The Caltrain Holiday Train traditionally stops up and down the Peninsula at every town’s train station. Hansel & Gretel and The Nutcracker are featured at the various Bay Area opera and ballet companies. Families drive out to Half Moon Bay to fell their own tree. It is a time of cheer, and a time to recap the year, and to express gratitude and good will.

This issue includes an article on one of our favorite non profits, Second Harvest. We hope you give them attention this holiday season, they are a wonderful organization.

As broker & property manager, I enjoy sharing information and the passion for real estate.

My team and I serve 250 property owners on the Peninsula with the leasing, management, maintenance, and the listing and selling of properties.

We service multi-family, condominiums, single family , estate homes, and commercial properties. We work for owners directly, for attorneys, fiduciary services, family offices and other advisors. We have been serving the Peninsula since 1987, some clients since inception and in second generation. This issue also features our real estate development.

My hope is by introducing you to our way of doing research and looking at real estate, it gives you a clearer picture of how we can assist you and your clients with any questions and explore options regarding real estate on the Peninsula. Whether property management, sales, pro formas, development ideas, or broker price opinions - we are here for you.

Joseph Stein, Broker / President DRE0133710 Realty World Peninsula | Woodlake Anchor broker@myregroup.com (650) 375-0640 | (650) 375-1596 office www.woodlakeanchor.net www.peninsulahomefinder.com 520 Peninsula Ave, San Mateo, CA 94401

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Editor’s Note

PREP 2021

Sender: Woodlake Anchor 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 Watergate Sales Inc. dba 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.peninsulahomefinder.com