Yesterday Mayor Lee visited the Board of Supervisors for some formal policy discussion. All the questions and answers were prepared beforehand, but despite the stiff delivery there were some nuggets of info to examine. First, Sup. Olague asked about the now-defunct Redevelopment Agency - specifically, how will community voices still be heard without a lot of staff or resources. The Mayor assured that all the agency's affordable housing assets and functions have been reassigned to the Mayor's Office of Housing. MOH will also lead the forthcoming Housing Trust Fund. The City also created a successor agency to move forward with major project areas in Mission Bay, Hunters Point shipyard, and portions of the Transbay. To sort-of-kind-not-really answer the Supervisor's question, they're working on a transition system for the former Citizen Advisory Committees from Redevelopment areas.
Sup. Avalos wants to increase his district's green space and green canopy, and asked the status of the Alemany Street Greening Project. Currently, the median has only been greened from Lyell Street to Niagara Street, and the Supervisor wanted to know if there are plans to extend it all the way down to Daly City. The Mayor blamed funding for the hold up, since streetscape design and greening projects come straight out of the General Fund (the same General Fund that had a two-year deficit of $380 million). He also admitted that the City doesn't have the resources to maintain all of the street trees we already have. Apparently DPW is working on a study of tree maintenance financing possibilities, that should be ready later this spring.
· Fireside Chat with Mayor Lee [Curbed SF]
· Board of Supervisors agenda for March 13, 2012 [SF Gov]
[Mini Hall via Curbed Flickr pool/Chris Saulit]
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Now that the office market appears to be taking a turn for the better, that shadow space will start to fill up, and in most places it will have to fill well before the company looks to take on additional space. Today Grubb & Ellis, a commercial real estate services and investment company, put some numbers to the scenario. "Grubb & Ellis expects that shadow space vacated during the recession will accommodate about one-third of all net new demand in 2011 and about one-fourth in 2012; this activity will not be reflected in the published statistics," writes Bob Bach, chief economist, in his "U.S. Office Market First Look: 2010-Q4" Bach goes on to say that the "still-tepid rate of hiring," combined with this shadow space, will keep the office market "struggling to keep up with prior recovery cycles." Office buildings gained 2.5 million square feet of occupied space in Q4 of 2010, the first increase since the end of 2007, according to Reis, Inc., a commercial real estate analysis firm, but the 17.6 percent vacancy rate still represents a 17-year high. That doesn't seem overly concerning to investors in the office market. Pricewaterhouse Coopers surveyed 200 real estate executives, including investors, lenders and brokers, and found more than 70 percent believe the commercial real estate recovery is real. 32 percent say they are looking to invest in the office sector this year, second only to 45 percent who say they would opt for the apartment sector. Yes, 28 percent of office property mortgage loans will mature in 4Q '11, or about $6.8 billion, according to Fitch, in a still healing liquidity situation. But Fitch also reports that the pace of commercial loan modifications is quickening. "Loan modifications continue to dominate as a resolution method," writes Managing Director Stephanie Petosa. "Servicers will resolve loans with increase velocity as liquidity returns to the CMBS market." As more jobs are created and fewer are lost, the office sector is heading toward recovery. Investors should be careful, however, to take shadow space into account when looking at specific properties and consider distressed properties, as office loan default rates remain high. Questions? Comments? document.write("");document.write("RealtyCheck"+"@"+"cnbc.com");document.write('');And follow me on Twitter @Diana_Olick