Starboard Commercial Real Estate

Hans Hansson | December 5, 2012

San Francisco's Tech boom persists as new startups and existing tech firms continue to expand and grab office space. Vacancy rates continue to fall while office rents climb higher and higher. As a result of this boom, our residential markets for both existing and new construction are also on fire. Long waits are standard for single apartment availability and cranes on construction sites are once again all over our cityscape, even with limited financing opportunities for construction. While this may sound good for our economy there is always a downside to be considered.

Anyone planning to remodel a home or build out an office today can expect to have a limited option of contractors and an impressive sticker shock to go with that selection. I recently completed a retail transaction requiring a restaurant and patio area to be built, with the job cost totaling near $250k. The architect developer that I hired to oversee the project brought in his usual four independent contractors to bid on the project – not one did. All four contractors indicated that they had to pass on the project because they could not complete the job in the timeframe requested.

Since San Francisco is in an economic and development bubble while the rest of the Bay Area and the country are stagnant, contractors are now coming into the city to find work. The problem is that on bigger jobs, the local unions are unhappy finding outside electricians and carpenters, even if they are union, because they compete with unions here. Non-union firms are an option but often are not familiar with how to expedite the process at the permit department; causing delays or trouble with projects when they are not started and completed properly though the permit process.

An even bigger issue now is the sourcing of materials. Between Hurricane Sandy and the fact that most vendors to don't always carry stock and their products are built before being shipped causes delays and results in higher prices.

Growth is great if it is feasible to support the engine that provides growth, but without the resources in terms of both qualified bodies and materials, growth will most certainly stall.
Posted 6 years, 8 months ago on December 5, 2012
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Comments on this post:

Re: Expect Delays in Occupancy
Thank you for this blog. It has a lot of great information and some great contributors. You put a nice twist to it.

2012/12/29 by Real Estate Investment Software wwwReply
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Re: Expect Delays in Occupancy
Recently I had a deal blow up on a sublease because a proposed tenant wanted to install a dishwasher in an already made kitchen (with sink). Union building only improvement needs cost $8500.00. Deal lost.

2013/01/23 by Anonymous • • Reply
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