SF Apartment : December 2016
by Emily Landes
Thanks to years of high demand and low supply, San Francisco property owners haven’t had to think much about how to attract and retain high-quality tenants. Instead, there’s been an “if you post it, they will come” mentality in the city ever since the economy began its recovery in 2011. Average rents have climbed swiftly and steadily since then, with the average rent for a one-bedroom in the city shooting up from about $2,200 in the beginning of that year to about $3,500 five years later.
But 2016 saw the beginnings of a sea change in the market, with nearly 9,500 brand-new apartment units becoming available for rent throughout the city. This represents the highest volume of inventory growth over the last 10 years and is 126% higher than 2015’s completions, according to commercial real estate research firm Yardi Matrix.
These new apartments mean new competition for tenants, some of whom already live in San Francisco and may be looking to trade up to something newer, and some of whom are coming to the city for the first time, drawn by the strong job market. Rents aren’t going up as fast as they used to, but in September they were still up almost 4% year over year, according to Yardi.
With the market slowing but still strong, now is the time to start thinking about how best to attract tenants to your property. So, what amenities were tenants looking for in 2016 and what will they be looking for in the year ahead? Here’s a hint: those all-original kitchens and bathrooms aren’t quite as “charming” as you may think.
The time for the funky, “vintage” San Francisco rental has passed, according to a panel of experienced leasing agents. Tenants care what their units look like, and they want to see modern, streamlined finishes.
That doesn’t mean you have to go crazy (or broke) making updates. Focus attention on kitchens and bathrooms, where a few simple changes can go a long way, according to Craig Berendt of Berendt Properties. “Take out the white or black appliances and place stainless appliances in every apartment,” he advised. “Add a dishwasher and disposal for sure.”
When choosing cabinets and countertops for units, don’t overthink it. “Don’t get too crazy on the style of stone in the kitchen; just make sure it’s simple and clean,” he said, adding that “the hot colors for kitchens these days are white cabinets and gray quartz counters.”
“Simple” and “clean” are good buzzwords for bathrooms as well. Fussy features like claw foot tubs and multicolored tiles are out, said leasing agent James Wavro of J. Wavro Associates. Remodeled and neutral is in.
Again, that doesn’t mean a down-to-the-studs, high-end overhaul. If you have an original bathroom with a neutral color scheme, you could get away with just updating fixtures and making sure it gets a good scrubbing between tenants. “There are so many of these 1920s pink-and-black bathrooms,” said Berendt. “People will jump on a clean, black-and-white tiled bathroom.”
Great Views, Great Rents
Tenants care about what they see inside their units, but they also care about what they can see out the window. Views were one of the top requests from tenants in 2016, according to the agents. Wavro clarified that this is especially true for the newer high-rises, but could also be a factor in other properties “in high places” with views of the Golden Gate Bridge, San Francisco Bay, or downtown cityscapes.
Tenants don’t just want views—they’re willing to pay extra for them, according to Danny Liu, leasing agent for AMSI. Liu said that he’s often seen the “awe factor” play into residents’ decisions about where to rent. “I have had renters on the fence with two units in the same high-rise building: one had sweeping southern views of the city, and the other with more obstructed views of the north,” he recalled. “They ended up paying an extra $300 a month for the views.”
Obviously, owners can’t create views where none exist. But if the property does have views, make sure you are taking advantage of them. If you only have the resources to remodel a few units, prioritize those with the best views since they are likely to bring the greatest return on your investment. Also, consider updates like larger—even floor to ceiling—windows in view units.
For a more expensive, but big-impact, update, consider adding a roof deck. This type of amenity combines two of tenants’ most-requested amenities: views and outdoor entertaining space.
Creating amazing spaces for outdoor entertainment was among the top priorities for developer Golub and Company when designing the new Solaire apartment building, according to Golub’s media contact Aleks Walker.
The Transbay high-rise has a “Sky Deck” on every third floor—eight in all—and Walker says they have been the building’s most “surprising and attention-getting” amenity. “Together with the rooftop sun deck on the 33rd floor, the spa terrace on the 7th floor, and our interior courtyard, they maximize the outdoor space available to residents and showcase stunning views of the city,” she said. Then there are all the interior amenities, like a co-working lounge for telecommuters, a game room with billiards and a big-screen television, a state-of-the-art fitness center, and 24-hour concierge service.
Yes, these are amenities that owners of smaller, older buildings may not be able to replicate. But it is worth noting what the new-to-market buildings are offering when thinking about how best to modify existing policies and spaces to attract tenants. For example, owners may not be able to put in Solaire’s pet grooming station or bike repair work area. Instead, think about welcoming pets or carving out a spot in the garage for bike parking.
Bike parking in particular is a growing trend, according to the leasing agents. Wavro noted that car parking, while still important, is on the wane. And Liu pointed to car charging stations as one of the possible big trends for 2017. (Solaire has several car charging stations, as well as dedicated spaces for three Zipcars.)
Other amenities within most owners’ reach include offering free wi-fi in common areas (as Solaire does), or at the very least making sure apartments are high-speed internet ready. Liu says these are the kinds of amenities today’s techie tenants—many of whom don’t even use a landline—require. He called units wired for the internet “mandatory” and said tenants will even check their cell reception in a unit before signing a lease.
Some of the most welcomed updates aren’t even particularly high-tech. In-unit washer-dryers and dishwashers continue to be on top of every renter’s wish list, according to the leasing agents. These amenities come standard in new buildings like Solaire, yet they are still absent from many older San Francisco units. Tenants might have been able to look past those missing features before, but with new high-rise buildings more and more common, there may come a time when apartments without these updates will be unable to compete.
When designing Solaire, Walker said: “We knew the building would appeal to residents who are design-minded, tech-savvy, conscious of the environment, and looking for a blend of convenience and luxury. Our amenities were chosen to meet all of those needs and to make a dramatic impact in the San Francisco rental market.”
Will your building be ready to handle that impact?
Emily Landes was the former editor of SF Apartment Magazine and is now a freelance real-estate blogger and editor.