Pent-up demand for new condos will continue in San Francisco during the next four years despite a return to historical delivery volumes and a pipeline of proposed deals.
This is the opinion of Garrett Frakes, managing partner of sales and marketing firm Polaris Pacific, who refutes the idea that 1,000 condo deliveries a year will erase the city’s shortage of for-sale units.
He explains that while the volume of condo deliveries will return to historical levels this year, only 200 to 250 units were delivered during each of the previous five years, thus pent-up demand will persist.
“That (the delivery of 1,000 units this year) doesn’t necessarily do much for us,” Frakes said, explaining that of the units slated for 2016 delivery an estimated 50 percent have already sold. By the time these projects are completed its unlikely a significant number of unsold units will be available to impact supply.
An uncertain pipeline of inventory
When combining all of San Francisco’s proposed condo, market rate multifamily and affordable housing projects the city has a pipeline of more than 62,000 units; however, that is over a span of 20 years.
Frakes seems to believe that a number of proposed condo projects will not come to fruition, as rising land and construction costs make projects harder to finance.
In the coming years the largest concentration of condos that do deliver will be situated in the southeastern portion of the city, in large part because of the master plan at Candlestick-Hunter’s Point. Frakes also points to areas of opportunity in Visitacion Valley, where some industrial land is being converted for condo use.
Some “new” condo units could come online as the result of apartment to condo conversions, but Frakes believes these occurrences will be minimal. The second tower at One Rincon Hill was recently converted into roughly 300 condos.
Frakes cautions buyers and financial partners to question the accuracy of real estate reports that suggest San Francisco’s condo market is becoming oversupplied or that demand is being met.
“That is not reality,” he said.
