A new niche is on the rise: the ultra-luxury condo.
Most new housing built in San Francisco bills itself as “luxury” because the sky-high costs of development requires developers to target the upper-end of the market. But now a new niche is on the rise: the ultra-luxury condo.
The latest project in this vein, One Steuart Lane, recently broke ground at 75 Howard St., where the 120 condos will each need to fetch at least $2.5 million just for the developer to break even.
That means the homes will hit the market at upwards of $2,500 per square foot — double or more what a typical “luxury” condo sells for in San Francisco.
“One Steuart Lane is going to be an elegant addition to the already beautiful skyline of San Francisco that will be the best-in-class residential building in the city,” Ben Kochalski, principal with the John Buck Co., told the Business Times.
The developers behind the project include Chicago-based John Buck Co., New York-based landlord Paramount Group (NYSE: PRG) and an affiliate of Chinese developer SRE Group Limited. Paramount bought the site in 2007 and entitled the project.
SRE is the majority owner and capital partner after grabbing an 80 percent stake for $110 million, or $916,666 million per approved unit, back in 2017. That was the highest price per unit ever paid for a housing site in San Francisco.
The site was worth the price because of its views and waterfront location “that can never be matched,” Kochalski said. The site is considered the last major residential development opportunity near the Embarcadero.
The project is the second San Francisco project for John Buck Co., which is also developing the $700 million, 750,000-square-foot Park Tower that Facebook recently leased.
Factoring in construction costs, the 20-story tower will cost around $300 million to develop. The building, designed by Skidmore, Owings & Merrill and built by Swinerton, takes the place of a parking garage on a site surrounded by office buildings including Rincon Center and Gap Inc.’s headquarters.
“One Steuart Lane’s ambition is to match the best site on the West Coast with truly world class architecture,” said Mark Schwettmann, design director of SOM in San Francisco, in a statement. “Pairing this architecture with Rottet Studio’s renowned interiors brings a level of design to our waterfront on par with the best residences in the world.”
One Steuart Lane will offer one- to three-bedroom homes including some penthouses ranging from 900 to 3,100 square feet. Sales of the homes will likely start in 2020 ahead of the building’s completion in early 2021.
In the past few years, condo developments such as Trumark Urban’s the Pacific in Pacific Heights and Jay Paul Co.’s 181 Fremont have targeted what developers say is a higher level of finishes, prime locations, services such as valet and concierge, amenities including a private spa or chef’s kitchen, stunning views and “starchitect” design that can justify upper price points.
“Developers really do have to step up,” said Gregg Lynn, an agent with Sotheby’s International who specializes in high-end condos. “We have no shortage of buyers who can afford those high-priced condos.”
Buyers in that category include existing Bay Area residents looking to for an urban home, people from other global cities, and tech millionaires or billionaires.
At 181 Fremont, the 57 homes are the highest residences in the city as they make up the upper floors of the 800-foot tower, which has office space on the bottom floors. The developer also focused on meticulously curating features such as cove lighting in the living areas, sleek Valcucine cabinets imported from Italy, custom wallpaper and the Brazilian quartzite kitchen countertops.
“The caliber of 181 Fremont — we had never seen that before,” said Lynn, who represented several buyers with homes in contract in the building. “181 Fremont did change the benchmark for other buildings.”
Some homes in 181 Fremont are selling for up to $5,000 per square foot with top-floor penthouses expected to go even higher. Those prices show that there is a market for pricey condos in San Francisco, Kochalski said.
Meanwhile, for the 76-unit Pacific, which is close to selling out, the location was a major selling point.
“It’s impossible to build a large new building north of Market Street,” Lynn said. “It would be very difficult to do that again. It was such a desirable neighborhood.”
Besides 75 Howard, more ultra-luxe condos are under construction at projects including:
Related California’s 118-unit Avery at 420-488 Folsom St. that recently started sales with prices starting near $2 million for a one-bedroom and just under $4 million for a three-bedroom.
Millennium Partners’ 706 Mission St., a $400 million, 43-story tower with 146 condo units, 60,000 square feet for the new home of the Mexican Museum. The tower started construction in 2016 with completion set for 2020.
The residences in Oceanwide Center, a $1.6 billion two-tower complex at 88 1st St. that will include office, hotel and housing that is under construction.
San Francisco is “maturing and changing and there’s an inherent demand that’s building,” said Garrett Frakes, co-founder and managing partner at Polaris Pacific, the condo marketing and research firm that is handling sales of One Steuart Lane.
The trend gained traction in San Francisco with residences in the St. Regis and Four Seasons, that opened more than a decade ago, and the now-sinking Millennium Tower that opened in 2007.
Buyers in the ultra-luxury sect represent “a narrow niche in the broader market,” Frakes said. “The typical buyer is more in the $1,400 per square foot (range). Now there is a relatively narrower niche that is more than $2,000 per square foot.”
San Francisco is known for high-cost homes, but not necessarily high-end, urban condos that are common in cities like New York or Hong Kong. Buyers in the upper price levels are much more discerning.
“Money doesn’t just spend itself,” Frakes said. “Buyers at that level can do nothing or deploy money to take a residence in New York or London. There are a lot of opportunity and choices.”
Read it at San Francisco Business Times