SAN FRANCISCO—Wouldn't it be convenient if someone had clear, intelligent answers to most of your CRE-related questions? Problem solved. Nina J. Gruen, a.k.a. Ms. Real Estate, a.k.a. the principal sociologist overseeing market research and analysis at Gruen Gruen + Associates, is here to answer readers' questions.

Dear Ms. Real Estate:

Do you see high cost cities like San Francisco and New York continuing to see modest increases in their housing, office and retail sectors? Or do you see prices and rents stabilizing or decreasing between now and 2020?

—Burning the Candle on Both Coasts

Dear Both Coasts,

Good question. At best, I see prices and rents in all these sectors stabilizing. But if I had to place a bet (with my money, or course), I would predict a decrease in current values.

With both England and the European markets destabilizing and China and South American having their own financial challenges, the impacts on American markets are not expected to decline significantly between now and 2020. And that is true even if Hillary becomes our next president. If The Donald becomes president, who knows how many of us will move to Canada, New Zealand or Australia?

While I am less familiar with what is going on in New York, when firms like Charles Schwab indicate they are unlikely to re-up when their downtown San Francisco corporate headquarters lease is up in 2018 and instead will look for a less expensive San Francisco or Bay Area site, this is not a good sign for either escalating or stabilizing office rents. Even the Silicon Valley startups are beginning to look elsewhere within the Bay Area, including some higher end suburban locations.

While housing prices are likely to decrease somewhat due to the anticipated number of new multifamily units expected to come to the market within the next two years, this decrease is not likely to be significant due to the fact that San Francisco's housing supply has not kept pace with demand for the last three-plus decades. Housing rents and prices are currently requiring a significant proportion of the city's residents to spend more than 40% of their income on housing. This, in turn, restricts even the experiential retail activities like eating out. Many higher priced restaurants have gone out of business within the last six months, and many more are struggling to pay higher rents and higher minimum wages, along with the city's imposed healthcare costs.

While I don't see a major downward trend like we experienced from 2008-2011, for those of you would like to live in San Francisco, you might be wise to wait a year or two before buying a unit or renting office space. Even then, it is likely you would have to pay more than a third of your income for housing and settle for less space than you desire.

Dear Ms. Real Estate:

—Burning the Candle on Both Coasts

Dear Both Coasts,

Good question. At best, I see prices and rents in all these sectors stabilizing. But if I had to place a bet (with my money, or course), I would predict a decrease in current values.

Instant Insights /

Is There Growth Left in the High Cost Cities?

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