SF Chronicle: Condo developers in S.F. hurting for buyers

Condo developers in S.F. hurting for buyers

James Temple, Chronicle Staff Writer

Thursday, January 22, 2009


(01-22) 17:49 PST -- Most developers unlucky enough to be marketing San Francisco condominiums today are scrambling for customers, dropping prices, boosting concessions or putting up "for rent" signs in an effort to fill their buildings.

Condos in the city have outperformed the real estate market as a whole throughout the downturn, especially on the luxury end, but tight lending and relentless economic gloom have spread the pain across the region and price spectrum.

-- The company behind Millennium Tower, the 60-story luxury project in SoMa set to open in April, will soon announce it is slicing all prices by 15 percent to entice buyers. In a surprising move, it's also extending that bargain to those who have already submitted deposits to purchase units.

-- The owners of the Radiance, the 99-unit waterfront mid-rise in Mission Bay, expect to say next week that they will lower prices by an average of 10 percent on selected units.

-- One Rincon Hill, the 64-story building that rises above the western approach to the Bay Bridge, isn't promoting any across-the-board cuts, but prices are down between 10 and 15 percent from a year ago, while spending on various incentives is up between 3 and 5 percent, said Paul Zeger, chief executive officer of Pacific Marketing Associates Inc., which markets that building.

-- Condo projects including the Artani at 818 Van Ness Ave., the Argenta at 1 Polk St. and the Highpoint at 1888 Geneva Ave. are being marketed as for rent or a combination of for sale and for rent, according to the Mark Co.

-- The Cubix Yerba Buena, the eight-story building at Harrison and Fourth streets divided into tiny units ranging from 250 to 350 square feet, is holding an "Economic Stimulus Sale" that began on Inauguration Day and will last until Presidents Day. During that time, it is lopping nearly 30 percent off the price of some units.

In fact, just about all condo developments with available units in San Francisco have lowered prices in the last few months.

"If they haven't, they're probably not moving inventory," said Alan Mark, president of the Mark Co., a San Francisco real estate marketing and research firm.

The developers doing the best in this market are the ones who are being realistic about the market price, spending the most on advertising and have the most desired properties, he said. Those doing most of the buying today fall into one of several atypical categories: all-cash buyers, parents purchasing condos for their children, South Bay residents looking for a San Francisco pied-À-terre and foreigners who see real value in the market, industry observers say.

The good news, Mark and others said, is that tours of properties have steadily increased since the holidays. With prices well off their highs and interest rates at historic lows, more and more people believe there are bargains to be had and are taking a serious look. The bad news is that, even if they're in a position to buy and convinced they've found a steal, many are reluctant to complete a deal because of the uncertainty in the economy.

"Everyone's got a knot in their stomach," Zeger said. "When that goes away, people will be rushing back to the marketplace."

In the meanwhile, One Rincon is managing to sell 10 to 12 units a month, a respectable number in a normal market, by bargaining on price and concessions with each potential buyer "to make a deal they think is good in this market," he said.

New York's Millennium Partners has also watched consumers grow increasingly reluctant to buy at its 60-story structure at 301 Mission St. Eleven months ago, the company announced it had put a penthouse into contract for $11 million and was well ahead of its sales goals. But after the onslaught of bankruptcies and government takeovers that began in September, the downturn caught up to the luxury market and transactions stalled.

"Interest remains strong, but people are stuck on the sidelines," said Richard Baumert, managing director of Millennium.

The company hopes its 15 percent price cut will provide the nudge potential buyers need, while bringing units down to a level that is affordable to a wider range of people. The average price tag for a unit was originally $2.5 million.

Millennium has already put in contract about 25 percent of the more than 400 condos. It extended the price break to those customers because "it was the right thing to do," Baumert said. "Everything we do begins and ends with our buyers."

Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, said there could be additional reasons to make the rare but not unheard-of offer: it suggests to potential buyers that they will be taken care of if prices slip further, while discouraging those in contract, whose 10 percent down payment is less than the 15 percent cut, from simply walking away.

Baumert said he was confident a significant majority of those in contract would close in April regardless of the deal.

The median sales price for all home types dropped 15.7 percent to $616,500 in San Francisco last month, according to a report by San Diego research firm MDA DataQuick released earlier this week. New homes, which almost exclusively means condos in the city, dropped 31.2 percent to $474,500.

Still, those numbers held up better than the overall region - which plummeted 43.8 percent - and will remain so thanks to the city's diverse economic base and relative lack of foreclosures, Rosen said.

"The Bay Area recession is still modest and people still want to live in San Francisco," he said. "We have a weakening market, but not a free-falling market."

E-mail James Temple at jtemple@sfchronicle.com.

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