Strata At Mission Bay All Leased Up At $3.02 Per Square FootAugust 31, 2009
According to J.K. Dineen at the San Francisco Business Times, the 192-unit Strata at Mission Bay has been fully leased having rented 90 apartments over the past two months with an average rent of $3.02 a square foot, “about 15 percent less than the $3.50 a square foot the developer had originally hoped to collect.”
UPDATE: A plugged-in reader’s point we probably should have noted as well, “[a]verage rent of $3.02 psft likely doesn’t include incentives (free rent for some period of time, free parking, etc).”
∙ Big Mission Bay complex fills up faster than expected [Business Times]
∙ Strata And Avalon III Riding A Mission Bay Rental Wave [SocketSite]
∙ The Scoop On Strata At Mission Bay, Its Environs And Rents [SocketSite]
Comments from Plugged-In Readers
$3/sq ft is quite an accomplishment for the sales staff!
I certainly wouldn’t pay $2,300 for a 650 sq ft place in this market but oh well…
Fully leased 45 days ahead of schedule.
Further proof that word is getting out about how fantastic it is to live in the Mission Bay/South Beach area.
Average rent $3.02 psf? Sounds like the current rents are less than that. Anyone know?
If true, I’d agree that $3/sf is a quite an achievement given the location and market — I’m paying less than that in a prime area. But then, it’s a number released by the developer. I’d take it with a grain of salt.
Is this really fully leased? According to this site (http://www.ubayp.com/rent/sanfrancisco.html), they’re offering free rent for September on some units and 6-12 month terms on others. Who knows? Maybe the Urban Bay site is wrong…
Average rent of $3.02 psft likely doesn’t include incentives (free rent for some period of time, free parking, etc). Developers usually “forget” to account for these sorts of things.
Rents for new, full amenity buildings aren’t too far off: about $3000 for an 1100 square foot place is about the norm.
“…15 percent of our renters came from out of state…”
If true, that’s lower than I expected after reading a lot of comments that characterized MB as a being comprised of mostly new residents from out of state.
“fully leased” does not necessarily mean all units are occupied. Due to leases expiring, people moving out, it is near impossible to have a building of this size 100% occupied. In reality if you are 100% occupied then your rents are too low. A building is generally classied as “fully leased” when 90-95% of the units are leased.
“….comments that characterized MB as a being comprised of mostly new residents from out of state.”
I lived in Pac Heights for 13 years before moving to MB in April. A co-worker lived by SF State before moving to MB a couple of years ago. But I have no research data one way or the other. The out-of-towner comments were usually just forceful assertions being made to promote the idea that MB is not part of the real SF.
I agree with Roger. I have been a MB resident for 1 year and almost everyone (90%) I have met that lives in the neighborhood was living in a different SF neighborhood. I have seen a few relocation moving trucks so maybe some are from out of state but most residents seem to be SF locals.
For a 1200 sq/ft place…3.00*1200*12=43200
Multiplier of 20 (pretty average own/rent ratio for SF) 864K for same 1200 sq ft.
If one subtracts the HOA dues (~.50/sq ft.) that residents at Radiance, Arterra, 325/355 Berry, etc. are paying (that those as Strata are not) it comes to .50*12*20=144K.
Considering there are several places w/ ~1200 sq/ft that could probably be had for $720K, it looks to me like one buying in this area would not be knife catching.
Multiplier of 20 (pretty average own/rent ratio for SF)
6% cap rate isn’t awful, but $1200 square foot place going for $3600 would cost more than $720,000.
The cap rate down there is still south of 5%.
Now that’s some fuzzy math!
Let’s say you do buy at $720k
$576k @ 5.3% = $3,198.55
HOA 1200 * .5 = $600
Taxes about = $720
Comes to $4,518/month and a $144k downpayment to live in something you could rent for less than $3,600/month with just a deposit.
Also note that the average rent/sq ft gets skewed higher by the smaller units.
It would be a lot easier to qualify for $3,600/month rent than a $576k loan and save up a $144k downpayment.
And rents are on a downward trend nationally…
The developer saw the market at 3.5/sf but had to lower to an average of 3.02/sf, or roughly 14% less. Rents overall have come down in that range as well since last year. Sale prices in SF have also lost ~20% overall in the same period.
Which means that 1 – the rent vs buy calculation would have been in a similar range last year and 2 – both rental prices and sale prices are more or less moving together in the same direction which is south.
I cannot see how we can discount the knife catching story there.
How is a 6% cap rate viable? 5% (minimum) mortgage interest cost, 1.125% taxes and let’s say 0.5% p.a. for HOAs puts you at a minimum of 6.625% per annum in holding costs.
You’d need something like 8%-9% cap rates just to be able to maintain the unit and pay for vacancies.
We’re closer to making sense than we were two years ago but the market is still not there by any means.
Anyone concerned about cashflow will be waiting for an additional 20%-25% drop in pricing (or a corresponding rise in rents).
Even with 50% down at a 6% cap rate you’d still be around cash-flow neutral, which is NOT something you want for this type of down-payment. I’ll start putting some real cash when cap rate are 10%.
$3,000 to live in Plastic Land in generic drywall and wall-to-wall carpeted box? Yeesh. This just confirms my personal experience – most of the folks I have met who live in MB are the same types of folks who seem to occupy the Marina. Folks with too much money and not enough good sense. Or taste. And rather douche-y.
I moved in when they first open and when the rent was high and they were only offering 12 month leases and said i was getting a deal. Two weeks later they dropped the rents considerably a few hundred and also dropped the parking, storage units monthly fees and was now offering 3-14 mo leases. they had all their staff move into the units (approx 10 incl maintenance people) right from the start to help fill up the place they told me. around May thru July they were very aggressively lowering their rents to compete with the new Avalon @ Mission Bay that was just opening up down the street and offered bigger units, more ammenities and same rents & deposits and lease specials. So they dropped the rents more. A 750 sq ft 1br apt first rented for $2800 then dropped to $2600 then dropped again to $2300 then down to $2200. Their smallest apt at 650 sq ft dropped from 2300 down to $1900. Parking was $200 down to $150 then down to $100 and they were giving more deals to people with 2 cars even though they advertise they don’t drop the parking rates for a second car to “be green” but that wasn’t true and now they parking lot is completely full and they don’t offer enough of a bike storage area to begin with.
With the bldg only 6 mos new, residents are noticing cracks appearing in the walls. The bldg as not as sound proof for a luxury building.
It will be interesting to see what they will do when leases start running out in the next 3-6 months and if they will try and keep them by maintaining the rents or if they will start losing them by increasing the rents to what they overvalued them at.
They have not been able to find anyone to lease the retail shops on the 1st floor either.
strata is full but they have 2 model units, approx 10 staff members living here full time and 1 unit that is used for guests (suite america) at $$$$ and I don’t believe its being rented out much and a small handful of empty units unrented due to tenant transfers to another unit or empty units never rented. the lease specials were up to 1.5 months rent off.
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