Economist Robert Shiller conceded Tuesday, June 25, 2013, on Bloomberg News that its a good time to be a flipper and that housing prices will probably rise for the next year. However, he does not think the rise is prices is a long run trend. Rather, he sees it as a short term phenomenon that cannot be compared to the long run up in prices that began in 1998.
Just to put the recent rise in the 30 year mortgage to 4.1% into perspective–it is still at a 100 year low except for recent times.
Snapchat Offices
Snapchat just snapped up $80 million of venture capital funding on a $800 million dollar valuation. Snapchat is a 10 employee firm located in a 2,600 square foot bungalow house at 523 Ocean Front Walk, Venice. This house was previously rented to for retail stores looking to tap into the Venice boardwalk trendy retail scene. This office location is right out central casting for a Los Angeles startup. It is what the world would want to believe where every startup in Los Angeles works. However, as most commercial real estate people knows–this is an oddity. However, it may attract some startups to Los Angeles instead of other competitive locations, when a startup can move not only to a beach house in Venice but also achieve some level of success.
Snapchat headquarters on Venice Beach
Why Snapchat’s rumored funding raises the high stakes for LA’s startup ecosystem | PandoDaily.
One of the only opportunities to buy homes for rent may be coming to an end. HIstorically low interest rates, a firm rental market, and a collapse in home prices, allowed investors to buy single family homes not only below fair value but also at cap rates that were as good or better than those available in multifamily properties. In the last year, prices in many of the best markets have increased significantly. The increased supply of rental homes has caused rents for rental homes to stagnate. Now interest rates are on the rise. Already in Los Angeles, the ability to buy rental homes at apartment cap rates is gone. Other areas of the country may be in the 7th inning. Soon private equity and investors will start their exit from this value play. That does not mean that homes sales and home prices will stop rising. The article below reviews that discussion.
The Los Angeles Time article below discusses the current movement of young people back into the City as renters in smaller living spaces. The article argues that Millennials are burdened by student debt and the memory of the housing collapse and therefore more likely than past generations to remain renters versus home buyers. Many academics claim a movement of Millennials to urban areas. A 2011 survey for the National Assn. of Realtors showed that — despite headlines about the new urban-ism — fewer than 20% of adults prefer to live in cities, while twice that percentage still favor single-family homes in the suburbs.
More Millennials than ever before are moving to the cities and renting. As they grow older and start families, they may be more likely to buy homes and move to suburbs for better schools. As confidence is restored and housing prices recover–Millennials will desire to own versus rent. But renting and urban living will probably be more accepted by the Millennial generation than several of the previous generations before them, Read the full article below. .
Are millennials a window of opportunity or a closed door for home builders? – Los Angeles Times.
Pingpong tables, employees in sandals, software code scrawled on the walls, a bounce house in the lobby.
No, it’s not a Silicon Valley tech company. Rather, it’s a scene from one of several new tech-focused office buildings in Southern California where dozens of start-ups are setting up shop and sharing the work space.
From the Lofts At Seven Website. Click on image to make it larger.
Food trucks, folding chairs,and bicycles form the nucleus of an impromptu, semi-permanent food court.
Jim Andersen, President of NMS Properties, Inc. in his address to NAIOP-U in Santa Monica provided a sharp contrast on apartment renovation versus Jerry Fink of the Bascom Group in a previous presentation. Bascom does mostly suburban apartments,while NMS specializes in urban apartments primarily in Santa Monica. When renovating a suburban apartment building, Jerry Fink of Bascom advocates focusing on exterior improvements first (curb appeal) and installing common area amenities. Paint the building, improve the landscape, upgrade the signage. Then put in the amenities: tot lot, movie theater, gym, club room, roof deck, pool, spa, fire pit. In urban areas, we call these apartment buildings: Mc W Apartments. Bascom’s concept is that apartment dwellers do not want to leave the building at night and on weekends. The apartment complex becomes a self contained fortress city where all the residents needs are met.
NMS designs apartments for the young urban dweller,
who especially wants to enjoy the amenties of the city and surrounding neighborhood. These dwellers are less likely to have a car and want to work and play near where they live. NMS spends most of its time thinking about designing the interiors for efficiency, quality, and style and less time on exteriors. NMS provides higher interior finishes and does not provide nearly as many common area amenities as Bascom. Where Bascom provides a vinyl wood looking floor, NMS would provide an engineered wood floor or high quality wood like laminate floor. NMS’s client appreciates style and quality. Other finishes include stainless steel appliances, in-suite washer dryers, stone counter-tops, custom designer solid wood, cabinets, and high end lighting.
NMS reviews every inch of space with excruciating deal to make sure no space is wasted and to produce smaller unit sizes than its suburban counterparts. A hallways may house the kitchen, dining table, and desk. To reduce the impact of its smaller size spaces, NMS tries to provide a higher ceiling.
Young urban dwellers use their apartments as crash pads and spend more time at work or utilizing urban amenities. When they eat at home, it is likely to be prepared food and in front of the television. NMS urban tenants work close by and have less furniture.
The new growing young urban dweller has different preferences than its suburban counterpart This demographic group demands a different apartment development and renovation strategy.
Michael Knott, managing director of Newport Beach, California-based research firm Green Street, wrote in an e-mail that West Los Angeles is the top office market based on forecasted rent growth growth through 2017. In contrast, he said San Francisco’s office market is now in the “fifth inning” of a nine-inning recovery, with “decelerating” growth that’s dropped its five-year outlook for rent increases to second in the U.S. based on revenue per square foot.
Office rent growth in San Francisco has been quite spectacular while office rent growth on the West side of Los Angeles has been slow. San Francisco’s rent growth has produced a development wave that is the greatest since 1991, while the West side Los Angeles office growth consists of a few warehouse conversions. You can read the full article below.
San Francisco Leasing Slows Amid Office Boom: Real Estate – Bloomberg.
A recent article in the San Francisco Business Journal announces the successful conversion and lease up of a marble clad mid rise to creative office.
Hot tech firms take space at renovated 550 Kearny – San Francisco Business Times.
Why did the owners of this building convert and market itself as creative office? Because that is the space that is leasing and selling. As many parts of the economy grow slowly and even shrink–new media and technology continues to grow. New media and technology desire creative office. In many cities–office owners and architects are spending hours at the drawing board trying to figure out how to position their properties as creative office. 550 Kearny was neither in the best area for tech or was the best building for a conversion. It was, though, a poured in place concrete building with decent ceiling height. But most important–it was in the middle of a city going through another technology industry boom. These buildings are known as soft creative: conventional offices converted to creative by exposing their natural structural elements. Typically, creative office buildings are converted warehouses that have the ceiling height, windows, and structural elements of more traditional creative office.
Creative office is one of few office products with a growing demand, and all owners want on to this life boat. However, eventually, the number of conversions could capsize the boat. After the dot com bust, owners converted many of these soft conversion back into traditional office space (at $50 to $60 a turn–ouch!).
PMI Properties 