The Burlingame Voice

Bay Area Exodus? How Big? How Long?

A lot of the fire, heat and policy-making on the Peninsula lately has  been driven by the belief that we will be adding more of...well, everything.  Except perhaps affordable, local entertainment.  Rent control.  Affordable housing.  Mass transit.  High density.  Subsidized X, Y, Z and back to A.  ADU's.  UBI.  Free lunch.  What if it's all just BeeEss?

You can find polls and surveys to support or contradict any position you choose.  But you can't deny the fact of open market pricing.  Not the engineered, subsidized, hidden-cost stuff like renewable energy.  I'm talking the "walk into a place of business and get a price quote" response.

Here's the "walk-in" price that caught my eye this week.  A friend of a friend is moving to Portland.  I know, I know--really? Now?  He's got remote work status until..... who knows when.  She can transplant her practice anywhere.  All that aside, the cost to rent a truck to move your stuff yourself to Portland today is $2,500.  The price to rent the same truck in Portland to drive to the Bay Area is.......wait for it, $300.  If I gave you my special 20 minute How-to-Negotiate class, I'll bet you could get them to pay you $300 to bring the truck back for them.  It would cover gas, lunch and the Golden Gate bridge toll.

Will the exodus continue?  Yes.  Will it last more than a couple years?  Maybe.  Will it reverse within the next five?  Doubtful.  I'm glad I'm not all-in on a high-density, all-electric$$, bird cage with a minuscule courtyard, 6' x 6' elevators and no balcony that I will need to sell for $650,000 to break even.  The old saying "don't fight the Fed" only applies if you have to get in the ring.

Plenty of SF Office Space Available

If you are like me, B'game is the center of your universe.  It's also pretty much the geographic center of the "Bay Area".  I use the quotation marks because "Bay Area" sometimes refers to some pretty distant places--all the way to the Delta.  But from where we sit, the two biggest commercial centers-  EssEff and Silicon Valley--bookend us precisely.  The Wall Street Journal is keeping an eye on commercial space in both places and the headline is San Francisco's Office Market Cools as Startups Retreat.  Here are a couple of data points

For the past decade, San Francisco has outshined Silicon Valley in attracting new technology firms, entrepreneurs and younger employees, who tend to prefer the city’s lifestyle and attractions to the suburbs.  (Note:  we shall see how long that lasts)

Now, that trend shows signs of reversing. Office demand has been falling in both markets, as the coronavirus pandemic, slowing economy and the early success of work from home have caused firms to reconsider office use. But San Francisco landlords have suffered more than their Silicon Valley counterparts in nearby cities such as Palo Alto, Menlo Park and Santa Clara.

Commercial real-estate firm CBRE Group Inc. said the volume of tenants looking for space has fallen about 56% in San Francisco, compared with about 32% in Silicon Valley, between the end of February and the end of May.  San Francisco now has the highest sublease availability in the country, with about 30% of the available space in the city being listed by tenants, according to data firm CoStar Inc.  “It’s likely sublease space will continue to flood the market in the year ahead,” CoStar said in a report.

The piece goes on to make the point that Silicon Valley is more stable due to less reliance on startups and more on larger companies with better balance sheets.  My limited chats with people working for Valley companies jives with the market chatter that says "Hey, this working at home thing is pretty good".  I think the trend is solid and will result in some changes to the B'game residential profile.  More on that in the coming week. 

Single-Family Homes Need Single-Family Zoning

The Wall Street Journal and the NY Times are both reporting that people all of sudden want out of dense city living and are on the hunt for single-family homes in the suburbs.  We talked about that and the associated turn away from mass transit here a month ago.  But it's not just the national media reporting generally.  Our very own high-performing realtor, Raziel Ungar, is seeing much the same thing right here in B'game as he wrote this week

It's been an adventurous week in real estate - from what I've seen, things are heating up. Two homes in Burlingame that were well priced, move in ready, and in excellent locations, had five offers each on them and sold multiple hundreds of thousands over asking. I've had more inquiries in the last few weeks from buyers living or renting in San Francisco than I can remember in a concentrated period of time; naturally, many people who may or may not have considered the peninsula, Marin, or the East Bay have placed moving to the suburbs to a home and a yard towards the top of the list. An article in yesterday's New York Times called Coronavirus Escape: To the Suburbs detailed in more detail what I have been experiencing as well.

The Journal's take on the trend is that it's not just buyers.  Renters are feeling the same need

Wall Street’s wager on high-earning suburban renters is paying off, and it is raising its stakes.  Investors are flocking to America’s mega landlords, drawn by signs the companies that emerged from last decade’s foreclosure crisis owning huge pools of rental houses are weathering the economic shutdown far better than feared. Many also expect that the coronavirus pandemic will make suburban single-family homes both more desirable and more difficult to buy for even the relatively well-heeled.

Share prices of the largest home-rental companies, such as Invitation Homes Inc. and American Homes 4 Rent, have outpaced the broader stock market since they and the S&P 500 bottomed in late March. Invitation is up 57% since then and American Homes has gained 36%, compared with the S&P 500’s 31% climb.

Perhaps you also saw the SF Comicle piece about people setting home offices in tents in their backyards to get some more private workspace.  You can only do that if you HAVE a backyard.  So the question is will the city continue to fight to protect single-family zoning, will the state bureaucrats get drawn into more pressing matters than ruining neighborhoods and will the development industry respond?  One of the rare silver-linings of the Covid-19 upheaval is according to Zumper "It seems rents for studios through 2 beds in Burlingame have seen large month-over-month drops between 5-7%".  Anyone care to guess whether or not rents would be coming down now if we had rent control in place?

30 Ingold Rd. To Get 298 Units

I'll bet not one in a hundred B'gamers know where Ingold Rd. is.  I didn't.  It's a small street off Rollins just over the train tracks from the Police station, a little south of Guittard Chocolates--which many B'gamers can locate.  When Ingold get a seven story building with 298 residential units built on it you will notice it.  The Daily Journal reports

The Burlingame Planning Commission gave glowing reviews to the 298-unit proposal at 30 Ingold Road from Summerhill Apartment Communities, during a meeting Monday, April 27.  The discussion marked the first formal examination of the planned seven-story building — which if built would be one of the largest housing developments in Burlingame over recent years.

Officials are optimistic the area is primed for development due to its proximity to the Millbrae joint Caltrain and BART station.  To that end, Loftis said he believed the project will catalyze further construction on and around Rollins Road.  “I would be disappointed and shocked if there wasn’t something else out there that doesn’t tie into this,” he said.

Well, I would be disappointed and shocked if the Planning Commission and the City approve anymore monster buildings prior to completing the 5-year update to the Urban Water Management Plan and figuring out where all of the kids in these new buildings are going to go to school.  Exactly which elementary school district is the northern part of Rollins Rd. in?  How much room does it have?  And does any planning commissioner care?  I doubt it.

Green Policies Backfire Against the Coronavirus

I had my next post outlined in my head when I read this piece in today's Wall Street Journal by a couple of podcasters that says the same thing only better:

We really knew there was a crisis when San Francisco, which 13 years ago banned single-use plastic bags in grocery stores, would now prohibit reusable bags as part of its effort to prevent spread of the novel coronavirus.

Plastic-bag bans aren’t the only “green” policy that has been found wanting in the real world of a pandemic. For decades environmentalists have hectored us to get out of our cars and crowd into subways and buses. “From Amsterdam to Tempe, Arizona, more and more cities are finding that eliminating cars from their streets makes people happier and healthier,” Fast Company reported in January, noting with satisfaction that in one Helsinki neighborhood, “none of the new apartments come with parking.”

You can’t have a car-free community without high-density housing, so environmentalists have promoted apartment living and a war on suburban “sprawl.” But now those living in dense apartment buildings risk their lives by walking out the door into common spaces and shared surfaces, even before they reach the crowded, densely populated streets below. Suburban families, by contrast, are often able to maintain community connections even while socially distancing and are more likely to have additional room for their children to roam while out of school.

Environmentalists talk a lot about “externalities,” the unintended consequences of economic decisions. The pandemic is a reminder that policy decisions have externalities too.

Mr. McAleer and Ms. McElhinney host the podcast “The Ann & Phelim Scoop.”

The question is will we learn anything from the COVID-19 onslaught?  Let’s face it, this will not be the last pandemic.  We’ve had H1N1, SARS, MERS, Ebola, Russian Flu, Spanish Flu and the regular flu that mutates every year, so the vaccine manufacturers are half-guessing each year.   More than one person has said to me “Face it, we will look like Manhattan in 20 years.”  Well maybe, but maybe not.  Now is the time to tell Sen. Scott Weiner—the enemy of single-family zoning—and the YIMBYS to take a hike.

Office Growth Drives Housing Demand, Duh.

It's generally fun to poke fun at EssEff politics, but this Election Day brought a rare instance of sanity out of EssEff voters.  As the Chronicle reported

Also winning was Proposition E, which will limit the amount of office space San Francisco can allow each year if the city fails to build enough affordable housing, based on targets set by the state.  The measure, which needed a simple majority to pass, was leading 54.54% to 45.46% — 130,736 to 108,983.

Prop. E was sponsored chiefly by Todco, an organization that operates and advocates for affordable housing in San Francisco, and its executive director, John Elberling.  Jon Jacobo, Todco’s policy director, said in a statement that voters “have shifted the paradigm of San Francisco. They have declared that we prioritize affordable housing before office development, and that is now the new norm in San Francisco.”

This move won't be a panacea nor will its impact be felt immediately.  In fact, a number of other crosswinds like the macro-economy, availability of leading edge skills, and the perception of quality of life in the Bay Area will all drive the influx or exodus of people.  Over the course of the last 20 years of my professional career I hired, or attempted to hire, dozens of professionals and admin staff into the Bay Area.  It's always been expensive and attractive, but re-balancing the availability of commercial space with residential space should help just a bit with the cost.  One wonders why it took a Proposition to do this in SF and why it isn't happening in other hotbeds like Mountain View or RWC instead of the futile rent control measures?

Banning Natural Gas in B'game

With several study sessions under their belts, the City Council is moving towards a ban on natural gas for new developments in town.  We first heard this out of Berkeley and discussed it last July here.  As the idea moves closer to home (the Daily Journal wrote it up here), I have some thoughts that I have just shared with the council via email.  Here is my letter

Dear Councilmembers,

I am intrigued by the discussions regarding banning natural gas hook-ups in future Burlingame developments including commercial, multi-family and single-family residences.  It strikes me that perhaps the councilmembers who support such a ban should lead the way in this change.  I suggest that each councilmember take the initiative to change out the gas appliances in their own homes first.  The community should be provided insights into both the capital and operating costs of this change.

It would be enlightening to understand the relative costs of electric furnaces, water heaters and high-end electric stoves and fireplaces that meld with typical Burlingame design aesthetics.  Similarly, if any councilmember has a pool or outdoor hot tub, it would be good to understand the options available to heat these amenities.  I can foresee some potential changes and additions to our existing building codes that might be revealed by councilmembers’ changeover projects.  Understanding these changes first would save residents and developers time and money as well as bringing our building inspectors up to speed.  The need for 220V power in many more home locations as well as the need for battery back-up and potentially back-up generators (with appropriate fuels if available) should be examined and shared with the community.  In my nearly 30 years living in Burlingame, I cannot recall a single natural gas outage, but electrical outages are frequent and not likely to improve in the mid-term future.

Lastly, we should all be provided with actual operating cost comparisons for the newly refurbished homes.  If these changeovers could be finished by next winter, a six-month cost comparison for the colder months of October to March would be ideal for assessing the true impact on Burlingame residents.

I look forward to the Council’s leadership on this important issue.

Sincerely,

Joe Baylock

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I'll let you know what I receive in the way of responses. 

  

School Bonds...And Then There Were 3

For the first time in more than 20+ years, I've been contemplating whether or not to support a B'game school bond measure (Measure O) and the SMUSHD Measure L.  Over the last 20+ years it's been a no-brainer to vote "yes" and to further support the schools with donations and charity auction donations and bids.  Parcel taxes and bonds for the local schools are the most local taxation we have and local is good.  In reading the full text of Measure O, my concern was the last bullet point on the Project List 

Workforce housing to increase accessibility for District employees to quality, affordable housing

I decided to check in with Superintendent Maggie MacIsaac about any housing plans and she brought Board member Davina Drabkin into the conversation.  Davina and I had a good conversation about the pressures the district is feeling to retain staff including credentialed staff in key areas like math.  Here are a couple things that came out of that discussion

• There is no pre-allocated portion of the $97 million for housing.
• There are a number of models being tried elsewhere (subsidies, partners, build to suit, etc)
• The Board included the language in order to be able to spend money on studying the issue
• Unlike some Districts, B'game doesn't have land available for any sort of build project and is unlikely to be able to buy it

As a former analyst, I also want to look at the metrics that might point to the severity of the problem, so Maggie was kind enough to provide the teacher turnover (not counting retirements which don't fit the problem) over the last 12 years which are

• Year        % Certified Staff Turnover
• 2007/2008             8.7%
• 08/09                    4.4
• 09/10                    10.6
• 10/11                    9.8
• 11/12                    7.6
• 12/13                    14.4
• 13/14                    12.2
• 14/15                    15.1
• 15/16                    13.8
• 16/17                    16.6
• 17/18                    12.25
• 18/19                    13.3   

There are a lot of factors that go into teacher turnover, but you can say there is a slight upward trend to the data.  There are also a number of non-District-driven projects that might address the housing issue-- the city project on Lots F&N, the stunning amount of building going on it town with affordable unit components, and the possibilities of additional teacher compensation that might not involve millions of dollars of debt.  Of course, the stunning amount of building will only exacerbate the school budget problem. The real challenge for Measure O and L is that a state Proposition, crazily listed as 13 that I'll just call the New Prop. 13, is also on the ballot for $15 billion.  As the Chronicle reported today

The largest school bond in state history, at $15 billion, is going to voters in March as supporters try to put a dent in a $100 billion backlog of failing boiler rooms, leaky roofs and new construction projects needed at K-12 schools and universities.

Proposition 13 — unrelated to the same-numbered 1978 tax measure — was placed on the ballot by the Legislature with bipartisan support.

Supporters, which include the education establishment as well as the construction industry, would allocate $9 billion to K-12 schools, $4 billion for California’s public universities and $2 billion for community colleges.

The prospect of voter fatigue is very real-- I am hearing it all over town.  So I'm still contemplating how I will vote, but I feel a little better having some information that I didn't have before.  Hopefully you are too.          

El Camino "Renewal"

You probably got the glossy mailer announcing the El Camino Real Renewal meeting next Tuesday and it just arrived in the e-newsletter as well.  I can't make it, but I did get a chance to sit down with Mayor Emily Beach and our resident tree expert, Jennifer Pfaff, recently to discuss the project at length.  Here is the official announcement:

Caltrans is hosting an open house to discuss the El Camino Real Roadway Renewal Project on Tuesday, January 28, at the Burlingame Recreation Center from 6:00 p.m. to 8:00 p.m.

The project area stretches three miles, between East Santa Inez Avenue and Millbrae Avenue, and encompasses some of the most challenging pavement, vegetation, sidewalk, utility, drainage, and safety issues. This stretch of El Camino Real is also lined with heritage tree rows that are listed on the National Register of Historic Places. 

Caltrans will share information about potential improvements to drainage, landscaping, sidewalk safety, ADA compliance, and rehabilitation of pavement. Learn more about the project by visiting www.elcaminorealproject.com.

During my meeting with the mayor we discussed things like the amount of money held in reserve for this major project ($110 million), the downward trend in the replacement rate of the trees (there were 750 in the 1970's and we are down to about 500 now) and the various CalTrans construction standards that may or may not be required for this project.  There are some trade-offs that will have to be made since full-CalTrans specifications can be in conflict with the Blue Gum Euc grove's historic status.  Things like the distance from street corners and poles, the distance between trees and the irrigation plans have to be negotiable.  The types of trees that would replace the Eucs is also on the table.

I'll leave the details to the experts like Jennifer and to those who conduct this first public meeting.  Let's just say it will be a controversial and yet hopefully collegial meeting. 

Arrivederci Fattoria e Mare

For some in town the Fattoria e Mare property will always be the "Velvet Turtle".  Visitors often ask me "What was the name of that restaurant right by the freeway and Broadway"?  But those days are long gone as will be Fattoria e Mare after a six year run -- another relic that provided memories, music and comraderie.  In it's place:

The Hanover Company is proposing a six-story building replacing the restaurant and adjacent parking garage and tennis court. The development would include 35 studio apartments, 74 one-bedroom apartments, 38 two-bedroom units and three three-bedroom units. Of the 150 units, 15 would be set aside at a moderate rate.

The project would also provide 195 parking spaces, 175 of which would be accommodated through a stacking system while six would be provided in tandem spaces and 14 would be standard spots. Most of the parking would be in an underground garage.

Parking concerns were raised at the Planning Commission session along with neighborhood compatibility of a six-story building.  But it passed 4-2.  There's no indication of discussion about where the kids from Anson Apartments (Summerhill), the Adrian Rd. development and now this Hanover project will go.  Hanover adds 194 bedrooms to the mix.

I'm also wondering which of these Big Four projects (counting the delayed Howard Ave. at Bayswater project) will trigger any major additions to the projected water deficit in town for a three-year drought.  The five year old Urban Water Management Study predicted on page 72  that supply available to Burlingame in multiple dry years is estimated to be reduced to 1,628 MG (year 1) and 1,376 MG (years 2 and 3).  I'm still hunting for why is a third consecutive year is estimated to be the same as the second consecutive year.  Table 6-4 shows demand exceeding supply in such a multi-year drought situation by 21% in 2020 and 30% if it occurs in 2040.  But these estimates predate the latest building boom here and in the rest of the SFPUC water service area.  And that is only for a three year drought.  At least the revision to these plans that is due this year includes a new 8 1/2 year drought scenario.  I'm betting the numbers will be scary to environmentalists and people who drink water.