Now it’s a world-class city, buyers are vying to own a piece of San Francisco’s hot real estate. Octavia Pollock finds out who and what are fuelling this latest gold rush.
Sa Francisco has claimed the hearts of millions since the Gold Rush sparked a building boom on the Californian peninsula in 1849. In recent years, the frenetic and fragile activity of the dotcom boom has grown into a stable economy led by established Silicon Valley companies, which value the city itself as a recruiting tool. The Arts scene is thriving, with world-renowned ballet, theatre and music, and treasures from America and Europe feature in its permanent exhibitions. The America’s Cup, held on the bay in 2013, showcased one of the greatest sailing and windsurfing arenas in the world and walkers flock to the Marin Hills and Yosemite National Park.
This buoyant mood is reflected in the property market, with average prices up by 14% since the same 2013 and the top third of the market 3.1% above the peak of 2007. Figures released by Savills associate McGuire show that the average sales price in the city hit $1.5 million (£905,000) this summer and five of the seven Bay Area counties saw prices at an all-time high. As Winnie Fok of McGuire points out: ‘The average price in San Francisco is the luxury market.’
Surrounded on three sides by water, San Francisco is a city of villages, each with its own character. On the northern shore lies the wooded Presidio, the Mediterranean-esque Marina district and North Beach, where Italian restaurants adjoin the tourist shops of Fisherman’s Wharf. Coit Tower looks south to Jackson Square, where galleries and antique dealers abound, and the skyscrapers and glitzy shops of the Financial District. Further westperiod in is funky Haight Ashbury and the Golden Gate Park and, above the rainbow-bedecked Castro, fog shrouds the lofty streets of Twin Peaks. The fog has an identity all its own in San Francisco–indeed, @KarlTheFog is a notable presence on Twitter (the headquarters of which are in the city).
Traditionally, the northern districts —from Sea Cliff in the west along the granite ridge of Pacific Heights to Russian Hill, Telegraph Hill and Nob Hill—have dominated the luxury-home market. Here are magnificent properties designed by foremost American architects, such as Willis Polk and Bernard Maybeck, in a cornucopia of styles. Steep streets afford views of the North Bay and the Golden Gate Bridge, one of the finest panoramas in the world.
However, although this area still has the highest-value homes, central districts are beginning to dominate the market. Five years ago, 62% of sales above $2 million (£1,206,553) were made in Pacific Heights, but that figure has dropped to 24%. In Potrero Hill, Noe Valley and Cole Valley, where pretty, colourful houses line quiet streets, the price of a single- family home has increased by an average of 26% in the past year.
‘Younger, wealthier buyers associated with Silicon Valley are choosing to live further south, where the weather is less foggy, there are plenty of amenities and independent shops and, crucially, easy access to the workplace,’ says Grazia Bennett of Sotheby’s International Realty. Many tech companies provide buses complete with WiFi to transport people from the city, ‘so commuting becomes productive time’.
One factor driving property prices is low inventory. Over the past four years, the city’s population has grown by nearly 4%, but new housing by only 1.3%. Sales move quickly and bidding wars can lead to homes going for well over the asking price. There are 5,000 units due to come onto the market in the next 18 months, but they are, says Mrs Bennett, ‘only a drop in the ocean’. With traditional family homes in short supply, condominiums, or condos (flats), are the properties du jour. Prices recently reached above $1,000 per square foot (£603) for the first time and the value of condos is at an all-time high, 1.5% above the peak of October 2005.
San Francisco is, therefore, a developer’s dream. In SoMA, the flat, formerly industrial lands south of Market Street, a proliferation of glass, multi-use skyscrapers is turning the skyline into a new Hong Kong. The 1,070ft Salesforce Tower, due to open in 2016, will be the tallest building west of the Mississippi and construction of the 605ft/850ft towers of First and Mission, jointly designed by Norman Foster, will begin in 2015.
Not all new condos are in SoMA, however. Grosvenor Americas, the American branch of the Duke of Westminster’s property empire, has been developing commercial and retail property in San Francisco since 1973 and recently ventured into the residential market with 1645 Pacific, a collection of 39 luxury apartments near Russian Hill, the first of which sold within 24 hours. ‘We’re interested in creating boutique homes in unique locations and spending more time on design,’ explains Steve O’Connell of Grosvenor Americas. ‘1645 Pacific incorporates a commissioned mural by Zio Ziegler on the garden wall.’
Further residential developments in classic San Francisco neighbourhoods are currently in the public-approval stage. ‘It takes a long time to do anything in California, with strict planning processes, but such constraints mean there will always be a demand for new property,’ adds Mr O’Connell.
Regulations make the city attractive to investors, notes Miss Fok. ‘People know what to expect and they represent a stable economy. Many investors want something that will hold value for their children’s futures.’ The buyer profile for condos has also changed as people choose proximity to restaurants and shops over a home with a garden. ‘Five years ago, you didn’t see any children in SoMA, but now there are day-care centres there. Pioneering developers are picking up neighbourhoods and transforming them, as has happened in Hayes Valley and is happening in Dogpatch on the eastern shore. Oakland in the East Bay is also looking up.’
The next 10 years will be exciting, believes Don DeFranco of Coldwell Banker, with historic buildings being converted into apartments. ‘Market Street, where several tech companies are already based, will start to change in the way that the Hell’s Kitchen area around Times Square in New York has changed. I used to walk down the centre of the street there—it was safer to dodge cars than guns on the sidewalk. Some people want something edgier than the über-modern skyscrapers and there’s more character in older districts.’
Beyond the city’s boundaries is open countryside, easy to reach and a major reason why people love the Bay Area. The wine country to the north has been regarded as one of the world’s best since the so-called Judgment of Paris of 1976, when Californian wines triumphed over the best French offerings in a blind tasting. Napa and Sonoma still represent the ‘primary second-home market for San Francisco buyers,’ says Patrick Barber of Pacific Union, ‘and it’s a hugely popular area for everyone from young families to businessmen wanting another challenge’.
On a cold day in the city, blue skies above Napa are visible in the distance. There are spectacular homes available, but agents note a reduced sense of urgency among buyers that could be attributed to the larger inventory. Sales tend to move more slowly ‘because they’re emotional purchases’, says Miss Fok. ‘It takes a special buyer to appreciate a $35 million property in Napa Valley.’
With a strong economy and a captivating city, the Bay Area looks set to continue its upwards surge and there is room to grow before it reaches New York prices.
The market must level out eventually, but with the continuing pull of the tech and biotech industries, it won’t be soon. ‘Where once San Francisco was on a par with Seattle, Boston and Chicago,’ says Mrs Bennett, ‘it’s now closer to New York, Hong Kong and London.’