A weekend topic starting with the New Times SLO. “So, where is the state of California headed? Even a casual follower of the news has noticed that a lot of companies are leaving the state, taking the jobs and tax revenues that they provide with them. Employers fleeing California cite ever-increasing taxes, a metastasizing regulatory bureaucracy, sky-high living costs, high crime, and a firmly ensconced ‘progressive’ political establishment promising even higher taxes and more anti-business legislation.”
“They are eager to get their kids out of a deteriorating California school system emphasizing indoctrination and minimizing rigor, and in which educational failure is addressed by lowering standards and eliminating the objective measurements of learning. Many flee the famous California ‘catch and release’ criminal justice system, for a safer environment.”
“Clearly, we are facing a future in which our tax base is shrinking, while our politicians continue to buy votes with more and more pricy programs and benefits, creating even more dependency. The large urban areas of San Francisco and Los Angeles have fared the worst. In San Franciso, a town famous for housing scarcity and exorbitant rents, the rents are dropping, and yet around one-third of properties remain vacant. Both cities find themselves inundated with rapidly spreading homeless encampments, and the governmental efforts to address the problem only aggravate it.”
“Large areas in each city now smell like an open sewer, and are littered with human waste and needles. Pedestrians gingerly navigate the sidewalks and parks like soldiers negotiating a minefield, and parents must keep their kids out of the playgrounds favored by junkies. Police no longer bother with property crimes like auto break-ins, and prosecutors refuse to prosecute all but the most grievous crimes. Merchants, prevented from physically stopping thieves, increasingly place their goods in locked cabinets to limit pilferage.”
“While Los Angeles has always been ‘challenging’ even in the best of times, the descent of the once-charming city of San Francisco into a dystopian cityscape of homeless squalor, crime, and governmental corruption and dysfunction, has been more shocking. The homeless influx, and the flight of the law-abiding and productive, evokes a future rather like that forecast in the classic H.G. Wells movie, The Time Machine, in which humanity devolves into the Eloi and the Morlocks.”
“In my fevered nightmares, I foresee a future where San Francisco is populated by homeless Morlocks, the few remaining Eloi who were unable to unload their over-priced homes in time, and political warlords. These warlords shall rule their shabby domain from fortified citadels, venturing out into their fiefdoms only during the relatively safe daylight hours to engage in the governmental looting of any remaining wealth, deeming it ‘tax collection.’”
“Can the future of the rest of California be any brighter? As our tax revenues plummet, state leaders will attempt to make up the shortfall by raising taxes still higher, perhaps imposing a wealth tax or revoking Proposition 13, sending still more of the ‘rich’ and productive fleeing the state. Soon, the term ‘rich’ shall include anyone with a job and a home. Eventually, the ‘rich’ shall be anyone who has scavenged a full bag of aluminum recycling.”
The Bay Area Newsgroup. “Three months’ free rent on a 2-bedroom apartment with a pool in West San Jose. A Lake Merritt studio in Oakland at a 50 percent discount for the first six months. Two months of ‘complimentary rent plus a $2,000 MasterCard gift card’ on a luxury high rise renting for $4,375 a month in San Francisco’s Potrero Hill neighborhood.”
“‘We ended up saving about $2,000 a month and got a better apartment,’ said Julian Jacobson, an account executive who moved into a new place in Russian Hill with his girlfriend in September, catching a 2-months-free rent deal on a bigger, better-located apartment without even having to put down a security deposit.”
“As residents seeking more space and cheaper locations continue to empty out of their Bay Area apartments, rents in the region have kept falling. In San Francisco, rents dropped 26.7 percent since March — the highest dip in the country and more than four times the statewide decline of 6 percent, according to a recent analysis by Apartment List. In Santa Clara, prices are down 17.8 percent and in Oakland, 14.2 percent, the company’s data shows.”
“‘Vacancy is through the roof,’ said Sid Lakireddy, president of the California Rental Housing Association. ‘The market’s beaten up.’”
“Now, some owners in San Jose, Oakland and San Francisco are offering big deals to lure new renters. ‘We moved around the block and why we did it? We doubled the size of our apartment at no extra cost,’ said Mykhailo Achey, an IT consultant who moved with his girlfriend in July into a new $5,000-a-month high-rise apartment in San Francisco.”
“Some smaller landlords with high vacancy rates or who aren’t collecting as much rent as usual are also struggling. ‘I have units in Oakland and we can’t get people to show up. No one’s moving to the Bay Area,’ Lakireddy said, adding that some owners of less expensive units have lowered prices too. ‘But you can only drop it so far.’”
From the SFist. “If the New York Times wasn’t reveling in the schadenfreude of publishing pieces about how unbearable San Francisco had become in the last couple years, they were taking seemingly great pleasure in reporting on the various missteps of the tech companies that fuel a good portion of the economy here. And while there’s no denying there has been an exodus of city residents during the pandemic that is driving down rents, did the Times need to go with the headline, ‘They Can’t Leave the Bay Area Fast Enough’?”
“The editor-in-chief of the San Francisco Business Times just wrote an editorial this week titled ‘There’s no denying the exodus anymore.’”
From Socket Site. “Marketed as a ‘fantastic opportunity to get in on the new and ultra chic community of The Shipyard,’ the two-bedroom, two-bath unit #216 at 451 Donahue Street, which was purchased pre-construction from Lennar for $560,800 in 2014, was flipped for $780,000 in June of 2016, shortly after the unit was completed. The 912-square-foot unit features HOA dues of $510 per month.”
“And having returned to the market priced at $788,000 in February of 2019, re-listed for $695,000 this past August and then reduced to $649,000 in September, the re-sale of 451 Donahue Street #216 has now closed escrow with a contract price of $623,000, down 20.1 percent from the second quarter of 2016 on an apples-to-apples basis.”
The Los Angeles Times. “The California dream has been fading for a long time, and people have been voting with their feet. In the last few years, the exodus has accelerated, with tens of thousands more people leaving than moving in. In the fiscal year that ended in July, Los Angeles County had by far the greatest net loss due to migration of any California county — more than 74,000 people, according to state demographers.”
“Wilber Rubio was already growing tired of L.A. Then came the pandemic. His job as a special-education math support teacher at a charter school went online. He missed the in-person interaction with his students. Rubio; his partner, Scott; and their three kids piled into an RV to see Scott’s extended family in Arkansas. They liked it so much they decided to stay. People in Arkansas, a state that voted overwhelmingly for President Trump, have been surprisingly open-minded about a gay couple with children, Rubio said.”
“‘I’m a gay, brown man. I didn’t think I would feel this way in a red state,’ he said. ‘I’ve been through a lot of social justice circles, and to be living in an area where you are still accepted regardless of your politics or identity has been refreshing. They do accept me, and they don’t care.’”
From Bisnow New York. “The pace of New York City commercial property sales picked up in the last quarter of 2020 as sellers started dropping their prices. Last year, $8.5B worth of Manhattan commercial property changed hands across 160 transactions, according to Avison Young data. That marks a 51% drop in the sales volume from 2019, per the brokerage. Overall, 2020’s dollar volume was 66% below the 10-year average.”
“‘In the second quarter, a lot of us, myself included, we were deer in headlights … there were people in the summer saying, ‘OK, there is going to be a vaccine and it’s just a matter of time,’ Avison Young’s Tri-State Investment Sales Group principal James Nelson said. ‘Sellers are [now] saying, ‘Hey, if I was looking for a quick rebound, that’s not going to happen, we’re going to be in this for a while. If I need to sell, if I need to do something, better now than have to wait years to get through this.’”
“Nelson, who expects it could take years for prices to return to pre-COVID levels, began seeing many long-term owners opting to sell toward the end of last year, and predicts that trend to continue through 2021. The recovery of the market, he said, hinges heavily on the office leasing market and companies returning to their workplaces. ‘We need those high-paying jobs, and we need people to return to New York.’”
“Meridian Capital Group Senior Executive Managing Director David Schechtman said that unlike in 2008, sellers have accepted quickly that there has been dislocation in the market and their prices have come down. He remains concerned about anti-business sentiment in the city and capital flowing out of the city.”
“‘I have handled $7B worth of sales in the past almost 15 years, and six years prior as an attorney, and never have I see such headwinds like we are facing today,’ he said, adding that he is working with people who are looking beyond New York to places that are ‘not hindered by a socialist City Council.’”