There are currently fewer than 100 new condos on the market in San Francisco. The only other new project that has opened a sales office is the 62-unit 300 Ivy in Hayes Valley.
via Buyers swarm over planned S.F. condo tower – San Francisco Business Times.
Buyers swarm over planned S.F. condo tower
At 10 a.m. on April 13, Oyster Development blasted an email to 1,000 people who had expressed interest in Marlow, the 98-unit tower the company is building at Van Ness and Clay.
At 10:01, the phones at the sales office started lighting up — more than 100 calls came in that day and appointments were made with 200 potential buyers and brokers. By 8 days later, the first release of condos in the 1800 Van Ness building — some 18 units — had been sold out at an average of “well over” $1,000 a square foot. “We don’t even have signage on the building yet directing people to the sales office,” said Oyster Development Corp. President Dean Givas.
For Oyster Development the burst of sales activity is not only an indication that Marlow, which will be completed in early 2014, will be a financial success, it also helps set the stage for the another 400 units that Oyster Development has in the pipeline. Givas said he will start construction in July on 2558 Mission St., a 114-unit project next to the New Mission Theater. And next year Oyster will follow with a 282-unit development at Pine and Franklin streets.
The sales office at Marlow, which sits on Polk Street around the corner from the construction site on Van Ness, reflects the broader goal of building a brand, Givas said. The sales office cost $500,000 to build out. It includes a model unit and interactive screen that allows potential buyers to see floorplans and views by touching a unit.
“We didn’t spend this money because we were worried about the ability to pre-sell,” said Givas. “The market is ripe for that. We spent the money on the technology and sales office to elevate the buyers’ experience and to set expectation for our upcoming projects. There is a desire to brand ourselves, and hopefully we will accomplish that.”
In 2010, Oyster Development started picking off housing sites at the bottom of the market. But unlike the real estate investment trusts and private developers who were underwriting their land deals as rental units, Givas was an 100 percent believer that San Francisco’s for-sale condo market would come roaring back. It wasn’t an easy sell.
“He had the foresight to secure these properties at a time when most people had forgotten how to spell condominium,” said Garrett Frakes, a partner with Polaris Pacific, which is handling marketing for Marlow.
While Oyster Development is San Francisco-based, as are contractor Build Group and architect Kwan Henmi, the team also has a heavy Toronto accent. Oyster’s equity partner on all three projects is Toronto-based Tricon Capital Group. And while planning Marlow, Givas went to Toronto in search of more talent, hoping to take advantage of that city’s position as the No. 1 most prolific condo development market in North America. There, Givas signed on two Toronto firms: interior designer II by VI and Design Shop, which is responsible for Oyster’s renderings, animation, and sales office interactive technology.
“Toronto produced 18,000 units last year and it’s a market that pre-sells 75 percent of its units before construction starts as part of financing requirement,” said Givas. “There is a lot of emphasis on branding and a lot of emphasis on competition. It’s a benefit to be able to leverage that experience, the competitiveness in that market.”
Frakes said that the demand at Marlow is more measured and reasonable than the frenzy of 2005 when buyers formed lines around the block for projects like 88 Townsend. “We have seen this before and there are some uncomfortable memories related to it because at the time it was a reflection of loose credit standards as much as anything,” said Frakes. “The nice thing about this market is the demand is more tied to a strengthening economy and high-income jobs.”
There are currently fewer than 100 new condos on the market in San Francisco. The only other new project that has opened a sales office is the 62-unit 300 Ivy in Hayes Valley. Marcus Lee, sales director at Climb Real Estate, has two clients in contract on units at Marlowe and another five looking at it. “It is expensive, but the whole market is on fire. Demand is outstripping supply by such a significant margin, the question is how high are prices going to go?” he said.
Lee said the $1,000-plus prices are hard to swallow, but concerns are assuaged by the fact that neighborhoods like Russian Hill, Lower Pacific Heights and Nob Hill are so difficult to develop in. The three neighborhoods have averaged about 50 new condo units a year over the past decade. “There is something to be said for the combination of a new, contemporary building in a classic, old-world neighborhood.”
So far, 80 percent of the buyers live in one of the immediate surrounding neighborhoods. While many new developments in Mission Bay and Rincon Hill sell the neighborhood as much as the layouts, Oyster is taking a low-key approach to Marlow.
“These are exceptionally established communities and the people who live in those communities are really partisan,” said Frakes. “Socially and economically, they are significantly involved in their neighborhood. We don’t want to be patronizing to people who have lived there for 10 or 15 or 20 years. We tried to be subtle and deferential in terms of presenting the neighborhood.”
Givas said that Oyster is dedicated to contemporary design and efficient units that are smaller than the units in many projects. “I believe this is a very expensive city to live in and you have a larger pool of buyers if you have a lower gross price point,” he said.
Ross Edwards of Build Group pointed out that Oyster Development has picked the same team for all three of its projects. “Dean demands a lot of himself and his teammates but is incredibly loyal.”