South San Francisco Leads Bay Area Multifamily Construction

South San Francisco is shaping up to be a bright spot for housing construction in the Bay Area amid stagnant progress in the region.

Three large-scale apartment projects are in the works in the Peninsula city, signaling a forthcoming increase in housing capacity for the region, the San Francisco Business Times reported.

Last month, Trammell Crow Residential secured a $183 million construction loan from Kennedy Wilson for its Alexan Icon project, a 480-unit apartment complex at 1587 and 1588 San Mateo Avenue. Demolition of six commercial buildings on the site was completed early last year and the site remains flattened, according to SF Yimby.

Once completed, the Alexan Icon will feature two 85-foot-tall structures; one building will span 455,860 square feet with 294 units and the other will comprise 287,230 square feet with 186 units. Of the 480 total, 60 will be deed-restricted as affordable housing. There will also be 16,670 square feet for shared amenities and roughly 227,000 square feet for the 560-car garage, as well as parking for 480 bicycles.

Residents will have access to amenities like a resort-style pool and spa, club lounges, coworking space, bars and top-floor lounges.

The Alexan Icon project follows two other developments that have broken ground, according to Nell Selander, the city of South San Francisco’s economic and community development director. Syres Properties is building nearly 400 units at 410 Noor Avenue near the South San Francisco BART and Caltrain stations. Essex Property Trust is developing nearly 550 units at 7 South Linden Avenue.

“It’s significant that South San Francisco has three large multifamily developments underway,” Selander said.

Construction of new apartment buildings nationwide is at its slowest pace in 15 years, according to Jesse Gundersheim, senior director of market analytics with CoStar. So far this year, 2,344 apartment units in the Bay Area started development, roughly on pace with last year. Contrast that to stronger years when developers have launched 3,000 to 4,000 units in a single quarter, according to the Business Times.

Developers reportedly attribute the slowdown to higher interest rates, tighter lending standards and increased construction costs, with each unit costing about $600,000 to build while typically selling for $350,000, per the Business Times.

In South San Francisco, the spike in construction might partially be related to other multifamily developments that have leased well, Selander told the Business Times. The success of projects at 401 Cypress Avenue, 988 El Camino Real and 200 Airport Boulevard, which were all developed during or after the pandemic could potentially ease lenders’ worries about funding development, Selander said.

— Chris Malone Méndez