S.F. Multifamily – The Good News and The Bad News
Source: bisnow.com | Re-Post MNM Partners. LLC 1/13/2017 –
After years of multifamily construction, 2017 could be the beginning of a slowdown. Rising rents, high construction, a plethora of fees and a short-term lack of absorption could sideline many multifamily projects in San Francisco. Bisnow spoke with two multifamily experts to find out what to expect this year and how they are addressing the affordability crisis.
Emerald Fund principal Marc Babsin said there will be a lease-up battle this year, since several thousand housing units were created and delivered within the last two to three years. For the short term, the new supply arrived in greater quantity than can be quickly absorbed. This means new apartments are offering significant concessions. He said one property is now offering eight weeks free on a 12-month lease.
“With another 3,000 to 4,000 units being delivered in 2017, I would expect to see more of the same,” Babsin said.
Rising interest rates could stall new residential developments at least in the short term, Babsin said. Prohibitively high construction costs, expected to rise 5% to 6% this year, will also slow down new development. New developments also face significant fees, including a 25% below-market-rate inclusionary requirement, transportation impact fees, graywater treatment, better roof requirements and transportation demand management.