Emerging real estate trends

San Francisco ranks fifth in the nation as a location for real estate development and investment, according to a national study released Thursday in San Francisco.

The City lost out to top-rated New York City, which was deemed the most desirable metropolitan area to invest in development and real estate in the nation, according to the 2008 Emerging Trends study, an annual survey of real estate industry professionalsput out by PricewaterhouseCoopers and the nonprofit Urban Land Institute. Seattle was the only West Coast city to rank higher than San Francisco on the annual list.

Factors in San Francisco’s attractiveness to developers include its access to airports and ports, its emphasis on transit oriented development and its status as a “24-hour, global-pathway city,” experts said at the Emerging Trends in Real Estate Conference on Thursday.

“San Francisco is a multifaceted city with many diverse attractions,” said PricewaterhouseCoopers’ Jonathan Miller, keynote speaker at the conference, hosted by the Hotel Nikko. “It’s still the dominant 24-hour city of the West Coast, and it attracts a global market that few cities in America can attain.”

San Francisco received top-five national rankings for its potential in residential, office, hotels and retail development in the survey, including a first place ranking for hotel development.

Thomas Callahan, chief executive officer of PKF Consulting, said that profits of hotels are just now returning to the 2001 levels that were common before the dot-com crash.

The City also received a second place ranking for residential development potential, fourth place for office development and third place for retail investment-all hopeful signs that the area could withstand slow growth, or even a recession, in the upcoming year, Miller and others said.

Although the nation’s current subprime lending crisis has caused fears of a potential economic recession, San Francisco’s status may help insulate it from major repercussions in development.

“We look at the forecast for 2008 with a dose of fear,” Miller said. “We’re all walking on eggshells a little bit. There is a fear of a downslide, but if that happens San Francisco will certainly be better equipped to handle it than many other cities in the country.”

According to Jack Myers of San Francisco-based real estate firm Myers Development, vacancy rates of office buildings in The City have dropped slightly, from 9 percent 12 months ago to the current mark of 8.6 percent. The price of rental space has subsequently increased, rising from an average of $37.86 per square foot a year ago to $44.50 now.

Both numbers reflect positive signs for investors, Myers said, but economic factors could inhibit growth in the future.

“San Francisco is one of the hippest cities in the world, and it’s a wonderful incentive for both employers and employees,” Myers said. “But an economic recession would slow down job growth and effectively limit office development.”

San Francisco office space

Half of The City’s existing 80 million square feet of office space is designated Class A, the most desirable classification.

» 1.4 million square feet now under construction

» 1.3 million square feet set to begin construction in Q1 2008

» 700,000 square feet in the pipeline (city planning process)

Source: Myers Development Company and CB Real Estate

Investment opportunities

Top 10 cities for real-estate investment

1. New York City

2. Seattle

3. Washington, D.C.

4. Boston

5. San Francisco

6. Los Angeles

7. San Diego

8. Chicago

9. San Jose

10. Denver

Source: Emerging Trends in Real Estate 2008, Urban Land Institute and PriceWaterhouseCoopers

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