If office picture is dim, take a look at residential
Dan Levy [firstname.lastname@example.org]
San Francisco Chronicle [www.sfgate.com]
March 30, 2003
The commercial market in San Francisco continues to drag along with record-high vacancies and depressed rents, but huge new residential projects downtown are keeping construction crews busy.
Developer Monahan Pacific Corp. is scheduled to break ground Wednesday on a 165-unit condominium complex at the corner of New Montgomery and Howard streets, down the street from the historic Palace Hotel.
The 16-story, 200,000-square-foot project was originally supposed to include 50,000 square feet of office space. But the developers decided nearly two years ago to convert the building to all-residential.
“It was clear even back then (July 2001) that new offices were not going to work,” said Victor Gonzalez, director of development for Monahan Pacific. “But now, I’ve been thinking, ’Are we nuts?’ I don’t think so, because the residential market remains relatively strong.”
The building, called 199 Montgomery, will be marketed to “the middle,” Gonzalez said. Prices have not been set, but he expects the studios and one- and two-bedroom units to sell for between $400,000 and $600,000.
“You get a convenient location and a brand new building that’s built to current standards,” Gonzalez said. “People do want to live downtown, if you price it right.”
The development of the site, a parking lot for years, conforms to the city’s goal of building more high-rise residential projects around Rincon Hill, south of the Financial District.
Other high-rise housing in the area includes BridgeView and Avalon Bay on Beale Street, which are both open, and 333 First St., which is under construction.
Speaking to The Chronicle five years ago, former San Francisco planning official Susana Montana put the idea this way: “We see it as condo housing for empty nesters, people without kids or young professionals who want to walk to work and want lots of recreational options all around them.”
TECH SCHOOL STAYS PUT
After shopping around San Jose, Silicon Valley College has decided to keep its classrooms at 5201 San Ignacio Ave.
The tech-focused vocational school signed a seven-year lease for 41,000 square feet in the Sobrato Development building. At $4 million, the value of the lease works out to about $14 per square foot.
The deal, done directly with landlord Sobrato, replaces an expired sublease the college had signed with former tech tenant Alteon, which was acquired by Nortel.
“It’s almost considered a renewal because we were in under a sublease,” said broker Chip Sutherland of CB Richard Ellis, who handled the lease for the college.
“NEGATIVE IS NEGATIVE”
There has been talk about the commercial market finally hitting bottom in San Francisco, but tenant leasing specialist Dan Mihalovich says we haven’t seen it yet.
“In the first quarter, despite some new leasing, there were 590,000 square feet of negative absorption,” Mihalovich said, referring to the amount of unused space returned to the market.
“Brokers are looking for the proverbial bottom, but until we approach net zero absorption or get positive absorption, we won’t see it. Negative is negative.”
Mihalovich based the comment on his survey of 1,750 buildings around the city, encompassing some 102 million square feet of Class A, B and C space.
According to his figures, average asking rent in the first quarter fell to $21.30 per square foot—the ninth straight quarterly decline.
At the corner of 11th and Folsom streets in San Francisco’s SoMa club district, a new full-service restaurant called the Public is about to open in the 2,900-square-foot space formerly occupied by Wa-ha-ka and Una Mas.
The 35-seat eatery will serve “European comfort food,” say partners Tadd Cortell, Margaret McLaughlin and Anthony Laurino. They hope to begin serving the club crowds next month.
Marketing firm Barton Beers Ltd. has moved to 750 Battery St. in Jackson Square. The company took 3,500 square feet on a seven-year lease in the mid- ’80s structure, one of the newer office buildings in Jackson Square.
The rent for the first two years is $23 per square foot; for years three to five, it’s $25; and for the last two years, it’s $27. The effective rent is $25 per square foot for each of the seven years.
The deal also includes the rights to one parking spot in the building for $275 per month.
Great American Land manages the property for the owners, the Leonora Stiefvater Trust.
©2003 San Francisco Chronicle