San Francisco Home Prices Back to “Normal”

The prototypical Silicon Valley commercial developer and the AI chipmaker driving the region’s next big phase continue to pair up for a generational swap meet, with the former cashing eight- and nine-figure checks on a regular basis and the latter getting office complexes around the South Bay city of Santa Clara.

The long-established developer is Mountain View-based Sobrato, which began to make its distinctive mark on the commercial landscape of Silicon Valley in the 1950s, when Bill Hewlett and David Packard were still giving rise to the notion of a global innovation hub clustered around Stanford University in nearby Palo Alto.

Sobrato went on to develop hundreds of millions of commercial space in the area. It more recently has sold off more than $400 million worth of its portfolio to Nvidia. The chipmaker’s valuation has skyrocketed more than 10-fold in the past three years, with the AI boom driving its market capitalization past $4 trillion, helping finance the growth that has prompted the recent buying binge on office properties.

The latest exhibit of the trend came last week when Nvidia added 2701 San Tomas Expressway to its hometown portfolio for $83.2 million. Sobrato sold the 125,000-square-foot building, which was developed with three other buildings that form an office complex at the Santa Clara site.

Other recent sales by Sobrato to Nvidia include a May deal for the three other buildings in the complex on San Tomas Expressway for $254 million. Each structure has about 125,000 square feet of space, and all four buildings are situated around Nvidia’s headquarters at 2788 San Tomas Expressway.

Also in May, Nvidia bought a 10-building, 13-acre office and research campus from Sobrato at 2348 and 2350 Walsh Avenue, across the street from its HQ, for $123 million. In July, it purchased another property at 2740 Scott Boulevard, adjacent to the four-building office complex, for $4.5 million.

Sobrato’s take of more than $400 million indicates the developer is tops on dollar volume when it comes to property sales to Nvidia, but Prelock Holdings appears to take the cake for biggest single deal. Los Angeles-based Preylock got $374 million from the chipmaker in May 2024 for its 557,000-square foot headquarters last year.

The newest new ‘normal’

Break out the air quotes because housing prices in San Francisco have returned to “normal.”

At least that’s the analysis of real estate brokerage Redfin. The firm published a report noting that housing prices in the city are back at July 2018 levels — the last time the city’s real estate market could be defined as “normal.”

To make its calculations, Redfin used a mortgage payment-to-income ratio, coming to the estimate that homes now cost about as much as they did before the pandemic relative to residents’ annual income.

The median home price in San Francisco has increased 8 percent since July 2018 — a stark difference from the national median price surging 56 percent over the same time period. Annual household incomes in San Francisco have grown 7.7 percent, nearly double the 3.9 percent yearly increase across the country.

Across the Bay, Oakland isn’t far behind in returning to so-called normalcy. The East Bay city is poised to return to “normal” housing prices this month if prices remain stable or decline. By contrast, no other metro area in the U.S. is expected to reach “normal” levels until Austin in March 2027.

Using the same 6.7 percent mortgage rate calculation, Sacramento will return to “normal” in November 2028, San Diego in February 2029 and San Jose in May 2029. The projections don’t consider property taxes or insurance costs for California homeowners more heavily.

Residents in Orange County are seemingly out of luck, with no return to “normal” expected there, according to Redfin’s calculations. Home prices in much of OC have gone up by so much that it would be virtually impossible to return to pre-pandemic levels, even over the next decade.

Oceanwide finds a buyer

San Francisco’s Oceanwide Center, the similarly abandoned sibling of Los Angeles’ Oceanwide Plaza, appears to have found a buyer.

Dan Kingsley, co-founder of Bay Area development firm SKS Partners, is in contract to buy the development at 50 First Street. Kingsley and private equity alum Jay Yang are reportedly in talks with Haitong International, a lender on the project that seized it in 2021 from developer Oceanwide Holdings.

When construction began on the project in 2016, the goal was to build two high-rises with offices, condominiums and a high-end hotel and complete construction in 2020. The 2-million-square-foot project came to a halt after Oceanwide Holdings’ financial issues and debt became impossible to overcome. The total cost of the development effort was valued at $1.6 billion.

The long gap since any work has been done on the project means that Iingsley and Yang, or another buyer would have to apply for permit renewals with the Department of Building Inspection even if they choose to stick with the current entitlements on the property.

A curious CEQA proposal

California lawmakers are seeking an oddly specific legislative carveout in Santa Barbara.

The newly introduced Senate Bill 158 calls for subjecting any project within a city of more than 85,000 but fewer than 95,000 residents and within a county of between 440,000 and 455,000 people to undergo environmental review under the California Environmental Quality Act, which received a major overhaul in July as exemptions for environmental reviews were expanded. The bill also aims to prevent CEQA exemptions to any projects next to a wetland, a creek and a state-registered historical landmark, as well as any projects larger than four acres and those that use builder’s remedy for development.

That criteria narrows it down to just one project in the whole state: A 270-unit, eight-story residential building proposed for construction behind Santa Barbara’s historic Old Mission.

The district is represented by Sen. Monique Limón, the incoming leader of the State Senate. Limón denied that she’s out to prevent the development with the legislation.

More multifamily properties trade hands

Yet another multifamily property in San Jose has traded hands.

The 230-unit LINQ apartments at 1700 Newbury Park Drive sold to a joint venture between Ethos Real Estate and Prospect Ridge for $97.6 million. The seller was an affiliate of Stockbridge Capital Group, which acquired the property for about $104 million in 2019.

The complex is near San Jose’s Berryessa BART station, which is set to transform with new commercial and residential developments surrounding the station. The progress of SB 79 in the state legislature could boost further development around transit hubs throughout the Bay Area if passed.

Meanwhile, in Walnut Creek, Acacia Capital bought the 358-unit Waymark apartment complex at 101 Pringle Avenue for $190 million. The sellers were Blake Griggs Properties and Transit Village Associates, the firms that developed the complex. The purchase price was 15.1 percent below Waymark’s estimated value of the property of $223.8 million.

— Chris Malone Méndez