The Rise of Web 3.0 and the Fall of Web 2.0 in the Bay Area Office Market

web 3.0

Investors and venture capitalists in January 2016  hammered the valuations of technology companies both in the public and private market. Recent stats show a reduced commitment to venture capital funding in the first two months of 2016. Some venture capitalists are warning startups to prepare for a long winter in fund raising and to conserve cash. Web 2.0 had a spectacular run and brought even more innovation than during Web 1.0. Technology is volatile and is prone to over valuation and under valuation. We may have indeed reached the point where  tech employment starts to contract and Bay Area office absorption slows and at some point turns negative.

It is not clear how this weeding will take place.  Without a concomitant recession, it can be lighter and less dramatic initially  Perhaps, we have lost site that most startups fail.  A business can still succeed even if every investor does not benefit.  The 2009 funding freeze was much different than the 2000 bust.   In the 2000 bust, most startups just failed, whereas during the 2009 funding freeze–startups and tech companies cut back and froze expansions.  Despite a nasty recession–many tech company revenues kept growing in 2009.  By 2010–fundings and expansions resumed.

However this revaluation of Web2.0 takes place– Web 2.0 will be followed by an even bigger Web 3.0. Innovations will be more startling. The entire world has shifted to a knowledge based economy.  Technology will dominate economic activity. Knowledge workers will make new and even more profound discoveries in life science, computational power, and artificial intelligence.

What ever dark days may be ahead–we must not lose sight of the long run. For the Bay Area–rents may fall and vacancies may rise precipitously over the down cycle. However, San Francisco and the Bay Area are the world’s capital of technological innovation.  The infrastructure and institutions are unparalleled anywhere else in the world.   During Web 3.0–San Francisco and the Bay Area will rise to even greater heights.

PMI Completes Another Creative Multifamily Apartment in Silver Lake

We are pleased to announce our completion of the renovation of a twenty seven unit apartment complex, located in Northeast Los Angeles. The property is located less than a mile from Sunset and Silver Lake Boulevard. It is known for its hip atmosphere and as an up-and-coming destination for millennials. This property demonstrates PMI’s Creative Multifamily Strategy and is located just steps from upscale dining, wine bars, boutiques, farmers markets, specialty food stores  and much more!

Creative Multifamily is a new line of small, low-rise apartments that are stylish, contemporary, playful and yet, still affordable.  Unlike many of the mega story amenity rich multifamily homes being built, our Creative Multifamily living spaces on London street offer  modernized bungalows with revamped  interiors and large outdoor patio spaces.  We stripped away the drywall ceilings in some units to expose and elaborate on the beauty of the high truss ceilings above.

Residents at properties like these are typically young creative’s that appreciate being located within walking distance of several diverse cultural amenities.



Will Los Angeles Apartment Completions Eventually Mushroom

According to MPF Research, developers will have delivered 6,000 new Los Angeles multifamily units in 2015. Yet, developers obtained permits for only 7,200 units in 2013 and 9,500 units in 2014 and 14,000 units in 2015. The pipeline grows but nothing comes out of the other end. The problem is that the time to process and build apartments has increased. Apartments, like oil, suffer from the hog cycle problem. By the time developers can deliver the units– the demand may have already already changed. In 2015–according to MPF Research–demand exceeded 9,000 units and further reduced vacancy from 3% to 2.7%.  Developers need the economy to be still humming when they finally can deliver these units.

I speculate that developers will file permits for 17,000 units in 2016. The apartment new supply will be the greatest since the 1980s and will be delivered in 2017 through 2019.   According to Marcus and Millichap–over 15,000 units are currently under construction. M & M anticipates the 6,800 units will be delivered in the Greater Downtown Region alone.

This new housing translate into 12,000 new Greater Downtown residents (includes parts of Northeast LA like Echo Park and Silver Lake). Indeed, Downtown is the new growth area for Los Angeles–a new young community within an old one.