WESTERN SNAPSHOT, DECEMBER 2009

San Francisco Multifamily Market

1. MARKET MOVES

The 440-unit first phase of Trinity Place, which will encompass 1,900 units upon completion on Market Street in the Civic Center area, is the only significant multifamily project on the horizon in 2010. Angelo Sangiacomo is developing the property without financing. Consisting of well-designed, 462-square-foot studios and being built on the site of a former motel, Trinity Place is a testimony to the developer’s perseverance in the face of community and political opposition and willingness to come out of the ground in today’s market.

2. MARKET MEASURE

Further job losses, which were evident through the end of the third quarter, have led to further softening in rents and occupancy. However, stabilization was beginning to set in during the fourth quarter. Nonetheless, this stabilization in rents and occupancy will not be able to completely withstand the job losses projected through year-end 2010.

3. THE MARK OF A MARKET

San Francisco’s desirability to tenants and investors, due to its cultural and recreational offerings, stable employment base and supply constraints, have traditionally meant higher rents and higher prices than surrounding areas in Northern and Central California. Properties have generally appreciated in value, but investment market conditions started to change at the height of the recession. In the third quarter, these shifts have produced a wave of assets in varying states of distress, including foreclosures, lender-owned properties and note sales.

— Jeffrey Mishkin is the first vice president and regional manager of the San Francisco office of Marcus & Millichap Real Estate Investment Services.

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