Recent History
I guess the first time I visited (south) Mission Bay was about three years ago when I decided to try the driving range to enhance my golf swing. (False hopes.) I had driven by the area innumerable times as I was exiting the 280 on the Sixth Street off ramp. It was a decent range and the adjoining snack shop was a good place for a casual lunch. All gone now.

The next time I visited was for a tour of the Gladstone Institute and the Genentech Hall where I watched a researcher inject a poor rat with some esoteric chemical in an effort to gain a better understanding of Parkinson’s disease. I am sure that the rat made the ultimate sacrifice. In more recent times, I have attended client meetings there at the Old Navy headquarters.

The area has changed dramatically just in the last few years! It’s mind-boggling what’s going on there; thus, this Pulse.

Redevelopment
Most real estate talk in San Francisco is usually about square feet. In Mission Bay we are talking about acreage, some 303 acres of land between the San Francisco Bay and Interstate 280. The Board of Supervisors established the Mission Bay North and South Redevelopment Project Areas in November 1998.

The first image at the end of this Pulse is an aerial view, probably taken sometime in early 2006. Take a look: it won’t be long before this image becomes an historical artifact. The driving range is still seen at center-left in the picture, just to the right of Interstate-280 as it crosses Mission Creek. The Gap building, which is actually the headquarters of Old Navy, is at center-right next to the Bay. This building, completed in 2002, was only occupied starting in January of 2007. In the center foreground is a cluster of bio-tech and life-sciences facilities, representing the start of a very ambitious program to make Mission Bay as important to the life-science community as Silicon Valley has been to the semi-conductor/computer industries.

Major development will take place over the next 10-15+ years and will include:

• 6,000 housing units
• 6 million sq. ft. of office/life science/technology/commercial space,
• A new UCSF research campus containing 2.65 million sq. ft. of building space on 43 acres
• 500,000 sq. ft. of retail space
• A 500-room hotel
• 40+ acres of public open space, including parks along Mission Creek and the Bay
• A new 500-student public school, a new public library and new fire and police stations

The second/third images shown at the bottom of this Pulse show projected land use and some specific building sites that already exist or have started construction.  

The Start of Residential
The first residential complex south of Mission Creek is the 99-unit Radiance by Bosa Development on parcel 10A (see the second and third image). This development is different from the high-rise towers that are going up in South Beach and Rincon Hill. The Radiance is comprised of six- and nine-story buildings with a connecting common green area. I guess we can call them “low-rise”. Bosa plans to build a 317-unit complex on the adjoining parcel 10, which will contain two 16-story buildings. The Radiance is under construction with occupancy due in Q3 2008, and Bosa will start driving piles in June of this year for the second complex, with occupancy expected in 2009.

While I have had a casual interest in the unfolding Mission Bay development, my interest has become more focused because of clients who currently live in a single-family home in Noe Valley. She is an artist, he a serial entrepreneur, and while they enjoy living in Noe, they would like warmer weather and a simplified lifestyle, one that includes updated construction/amenities and the concomitant ease of condominium living – a story that is becoming more familiar each year.

We have talked on an off for a year about them possibly moving to one of buildings north of Mission Creek. It seems that there is a different lifestyle being offered by the Radiance as well as other housing opportunities in the southern portion of Mission Bay. While the area is unfolding as less urban than the developments of South Beach, Rincon Hill and Transbay, it is still quite close to the financial district. Sitting astride the Bay, it has lookouts to the water and is in easy walking distance to my favorite funky restaurant, The Ramp. One of the drawbacks is that there are very limited neighborhood amenities at this time. It is going to take awhile until 4^th Street becomes the Chestnut Street of Mission Bay; that’s the plan. The light rail is now running on 3^rd Street and will connect to the downtown area.

Today, virtually the entire area is under construction. It has an expectant and warm feeling – maybe a cross between Gilligan’s Island and a Cosmopolitan. It’s totally different than any other San Francisco neighborhood and should not be overlooked or underestimated. The juxtaposition of research facilities, commercial, retail, residential and some of the best weather in San Francisco is an interesting combination not found elsewhere in the City.

The Current San Francisco Market
As you may recall from my Pulse in January, I noted that transaction volume in 2006 (compared to 2005) was off some 14% for single-family homes and off about 17% for condominium re-sales. Average prices in 2006 across the city were up 3.4% for single-family homes and 0.7% for condominiums.

Transaction volume is down again in the first quarter of 2007: off almost 10% for single-family homes and down 20% for condominiums (582 transactions for the first 2006 quarter versus 465 for Q1 2007).

While the volume of condominium re-sales is down dramatically, a lot of the buyer demand is being absorbed by new-product sales in the south of Market neighborhoods (not reflected in the MLS re-sale data). However, it is the lower rate of re-sale product availability that I find interesting. It is not that sellers can’t get their price; demand is strong across the City. People typically sell in reaction to changes of life circumstances – job relocation, divorce, upsizing/downsizing, death, school needs, etc. Maybe there is a brief lull in these life changes or perhaps slower reaction times due to broader concerns in a changing world?

Compared to the first quarter of 2006, average prices in 2007 were off 3.2% for single-family homes, and just about flat for condominium re-sales. What’s going on in the sub-prime market is not an issue in San Francisco that I can discern.

Summing Up
The MLS indicates that 363 condominiums citywide were on the market at the beginning of April, not including TICs, and not including an estimated 1,500 new-construction units. The MLS also indicates that of the 363 condominiums for re-sale, about one-third, or 129 units, are in District 9 – the neighborhoods of South Beach, Rincon Hill, Mission Bay and SOMA. So if you want to buy a condominium, as many of my clients do, only 15% (234 out of 1500 units) of the available inventory is in neighborhoods outside of District 9, and those units will probably be gone in 30 days, given the current low level of re-sale inventory this spring.

The new developments, primarily in District 9, are currently filling the gap of buyer demand. While the Radiance and other residential developments planned for south Mission Bay are in a sense true pioneers, in the blink of an eye the aerial view shown here is going to change dramatically. This new frontier will attract many settlers jockeying for their piece of the New World, and certainly they will have an impact on the natives in the north.

As a seasoned frontiersman with his finger on the pulse of the ever-changing market, I am glad to lend my expertise if you should need a guide: a guide not only for the new territory, but one who knows what is affecting the old territory as well.