This past week I attended the Urban Land Institute 2015 Fall Seminar in San Francisco. The week was a truly world-class event with more than 6,000 professionals traveling from across the globe to attend. The host city provided an exceptional backdrop exemplifying forces shaping the current landscape of commercial real estate: urbanism, densification, technology, transit orientation and globalization. Yet outside the conference, in The City by the Bay, limits felt tested.
I felt a distinct fever pitch. Different that the tech run-up in the late nineties that forced me into a two-bedroom apartment with three other people. More frenetic than the housing-bubble fueled mid-2000s that landed me in a then not-too-expensive SOMA condo on the “edge” of the city (now arguably the center of the SF universe).
Today the city feels a bit cold. Hardened by a seemingly self-imposed needed to “out start-up”‘ the competing start-up. The rats in this race are on steroids. App delivered, curated, farm-to-table, sustainably raised steroids.
The dynamics produced by the confluence of enviable economics factors currently present in San Francisco are phenomenal for commercial real estate investment. Staggeringly phenomenal. But are they great for living?
As my plane begins its descent back into the Emerald City I am reminded of why Seattle simply kicks San Francisco’s ass – and will continue to do so.
1. Noise
I am not talking the quaint clanking of bells and underground cable-pulling of the trolley cars – San Francisco is plain noisy. Nor am I talking about it quixotically emulating the white noise of NYC taxi cabs. Ambulance sirens, car horns, homeless people shouting kinda noise is all about the city. In Seattle we mostly hear seagulls. The occasional tourist will tap a car horn until Seattleites disapprovingly glare to shame such uncouth behavior.
2. Homelessness
In Seattle we have a problem with homelessness. In San Francisco it is pandemic. An interesting theory, confounding the sheer escalation in housing prices, is the influence of Airbnb and the ability to converts SROs, junky hotels and near any space large enough to house a human for the night into a profitable business plan. So, many people are forced onto the streets – and it is WAY beyond issues present just 4 years ago in San Francisco.
3. Crime
Crime is a factor in every major city across the globe – it’s simply a factor of urban life. However, from a quality of life perspective the proximity to or likelihood of interfacing with crime in one’s daily life is not without impact. California recently “demoted” many crimes from felonies to misdemeanors. The impact of making many crimes less punishable and the huge divide between wealth and poverty increases the instance of crime and makes life a lot less fun. We have our issues in Seattle, yet speaking with my friends in San Francisco (and my cab/Uber drivers), crime is on the rise in San Francisco in a serious way.
4. Traffic
In 2005, my commute from San Francisco to Silicon Valley was no picnic, yet I could regularly accomplish the task in 45 minutes of driving. Currently you can barely traverse San Francisco itself in under 30 minutes. Seattle is no haven for drivers. We are in trouble and staring down the barrel of some real transit issues, yet we have a fighting chance if we start making good decisions now. We still have a chance.
5. Day Trips / Outdoors
One of the great selling points of the Bay Area is trips to Napa, Tahoe, Half Moon Bay, Monterey Bay and beyond. All of those trips are steadily getting more expensive and impracticably harder to pull-off considering increased travel time and congestion. There was a time I could get from the Bay Bridge to Tahoe in under four hours – not so likely these days if you are one of the unlucky ones with a 9 – 5 job and report to a boss. I can get to Crystal Mountain from downtown Seattle in well under two hours, wine tasting in Woodinville is just minutes away. Point Seattle.
6. Apartment Rental Rates
And now for the kicker… for your seat at the table in San Francisco, expect to pay upwards of 50% of your earnings on rent. I toured some remarkable properties in San Francisco – from glorious Class A towers clad in glass and steel to microhousing with 250 square foot units. Guess, what? Either way you are spending $5.00 – $6.00 net rentable square foot. Seattle is certainly not a “cheap” city for rent, yet on a ratio of income versus rental rates, it’s one of the most affordable major cities in the nation. As a quick metric, incomes (adjusted for state income tax) are about the same in both cities, yet housing costs in San Francisco are double.
7. Affordable Neighborhoods
Young people will eventually have babies, trust me – they will. And when that occurs, they want nurseries. They may eventually want to paint a wall and store a tricycle. The price of admission for such luxury, buying a home. In San Francisco this will cost you (on a median home price basis) over $1.2M. In Seattle, merely shell out $500,000. For your $500,000 you will likely get a yard and possibly a garage for your Subaru. To accomplish such a feat in San Francisco you will need to cross a bridge and well, leave San Francisco.
8. Loyalty
Both anecdotally and by virtue of several conversations and listening to speakers this past week, everyone in San Francisco is working on the side. Whether consulting to a start-up or working on their own side project, the workforce is searching for the bigger/better opportunity – constantly. Employers in Seattle find their workers more committed and less likely to moonlight.
9. Durability
Building a career, a network and a community is difficult and takes many years. Often the best way to build stability is to remain close to your network and community. Yet, if life requires you to move to find housing, spend most of your time in the car fighting traffic or spend your way to survival it is hard to build a durable future in one location. The overall balance in Seattle provides a huge “durability” advantage, proven by the current Seattle gravitational pull.
10. Sports
Wilson versus Kaepernick. Nuff said.
I love San Francisco and have truthfully spent more time there than I have in Seattle. The points raised are ones to ponder and highlight the long-term benefits of investing in a durable city with a wonderful future ahead.
San Francisco is an amazing city. I was able to wander into three Michelin starred restaurants in a 24 hour period and spend my evening admiring gloriously up lit buildings composed of great architecture. Don’t even try to do so in Seattle. Over time, the cities’ similarities grow far closer than their differences. Currently, deeper analysis is at least interesting and at best a good foundation for a long-term investment thesis for the commercial real estate industry
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