However, market forces can address some of those issues. “At
least temporarily, the multifamily market that we see Uptown is
extremely soft and so I see rents the last couple of years going
down, not going up.” He also adds there are programs, tax credits,
HPD projects subject to regulatory agreements that guarantee rent
stabilization and rent control.
“At the same time, walking up the street here 32 years ago, I
can’t believe anyone with a straight face can say that these neighborhoods are not more vibrant and better neighborhoods today
than they were 32 years ago,” he says.
FRONTIER VERSUS EMERGING NEIGHBORHOODS
“Frontier is a little bit more of the Wild West with greater uncer-
tainty. Emerging is one where institutional equity has arrived, using
Oakland as an example,” says Ric Russell, executive managing
director at Cushman & Wakefield’s Oakland, CA office. “Five or six
years ago, institutional equity would not invest in Oakland, now
everybody wants to be here.”
He describes frontier neighborhoods as locations where people
are taking more of a risk and which are farther from neighbor-
hoods that have “arrived.” Russell listed Castro Valley, which is
north of Fremont but south of Oakland, just south of San Leandro.
He also identified Emeryville, traditionally a commercial city, but
also considered somewhat of a frontier.
With frontiers, Russell advises people to make sure they know
the submarkets. Just because values are rising in a nearby urban
core, investors can’t assume the same for another submarket—
even a neighboring one.
“The growth we’ve experienced over the last five, six, seven years
will not continue as far as rent growth is concerned. Occupancy will
remain very strong, but rent growth is going to slow,” he predicts.
“And if you jump into an area where you’re the first guy and you
think it’s going to be the next area, I’d be careful.”
Russell’s advice? “I wouldn’t want to be investing in a frontier
area. I would want to stick to early emerging areas,” he says.
Although Berkeley is traditionally a strong area dominated by
the student market, Russell still categorizes it as emerging with
extensive construction still being built. Over 600 units were built
last year and there are over 600 more that are planned to be built.
“It’s a traditional market, that has an emerging component.”
Russell points to Alameda as a solidly
emerging neighborhood. Adjacent to and
south of Oakland, it’s across from the San
Francisco Bay. Trammell Crow Residential
formed a joint venture, Alameda Point
Partners, to construct a $1-billion water-
front development on property that was a
vacant, former naval air station. The devel-
opers are building 673 units, which are
scheduled to open in 2021.
Russell says the brand new product with significant retail and
commercial development will attract tenants. As an island it has
geographical, waterside appeal. It’s a mile from Oakland and with
the ferry service, San Francisco’s financial district is a short distance. Plus, Alameda enjoys a very low crime rate.
GENTRIFICATION VERSUS AFFORDABLE HOUSING
Miguel Robles-Durán, associate professor of urbanism at the New
School, says there will be larger problem if rents continue to escalate and become more unaffordable. This will lead to not only
people having trouble finding places to live but property owners
unable to rent their buildings. He says it is already happening, particularly in the retail sector.
Tax payer funded, government affordable housing has its limitations. For example, New York’s 80 (market rate)/20 (affordable)
requirements with new construction have not significantly lowered
the statistics of the city’s rent-burdened tenants. And developers say
they are making it too expensive to build.
The New School expert also opines large deep pockets—such as
institutional investors—cannot be relied upon to buoy the real
estate market. The bottom line is residents ultimately have to be able
to afford housing to avoid homelessness and building vacancies.
“Real estate investors can move their money somewhere else,
where they can make more money,” says Robles-Durán. Unlike the
individual homeowners who live in their homes and have to pack up
their belongings and find another place to live, institutional investors and private equity can pull out their investments, and invest in
real estate elsewhere, in another country, or invest in another sector.
Robles-Durán sees newer developers address affordable housing
with more innovative approaches including participatory developments, which are more community-centered. With shared ownership, residents would be invested in the property and it would help
ensure affordability. Other developers are also looking into different
pricing schemes, charging market rate for large commercial tenants
but a more affordable rate for tenants with more limited financial
Younger developers are more accustomed to sharing economies
or industry disruption. “They understand in order to continue to
make New York City a livable, lively, great place, we need to keep its
population density as exciting as its people.” he says. ◆
4555 N. Sheridan is in Uptown Chicago, right off CTA’s red line.