SAN FRANCISCO—Prospects for Bay Area real estate markets have shifted significantly according to Emerging Trends in Real Estate 2018, the latest edition of the 39th annual report co-issued by the Urban Land Institute and PwC. In the report, San Francisco falls from 10th place in 2017 to 27th in the 2018 rankings. Oakland also dropped in the rankings from 14th to 20th this year, while San Jose jumped from 17th up to eighth place; the Bay Area's only top 10, GlobeSt.com learns in this exclusive.

ULI and PwC officials weighed in on the report and its future implications for the Bay Area earlier this week, going beyond the rankings released nationally in October.

“Housing is absolutely unaffordable in the Bay Area, and we are dramatically underbuilding. This is partly due to demographics, partly due to urbanization, but also due to self-inflicted wounds in California and Bay Area given our policies as they relate to development,” said Carol Galante, faculty director of UC Berkeley's Terner Center for Housing.

ULI-SF, the Terner Center and other leading organizations are focusing on housing solutions in a series of Housing the Bay panels and studies, culminating in a day-long event March 23, 2018 in San Francisco. All commercial real estate types are included in the annual Emerging Trends study, yet housing was a key factor affecting each market's prospects.

“There is a housing affordability and supply crisis,” said study co-author Mitch Roschelle, US Real Estate Advisory Leader for PwC. “Just because prices are going up does not mean that we are adding to supply.”

San Francisco's lower position on the list falls in line with a larger trend among major urban markets, including New York City, Chicago and Washington, DC, all of which rank lower in the 2018 forecast than in previous years. Notably, the top of the report's list includes secondary real estate markets.

“We're seeing places like Nashville, Fort Lauderdale and Salt Lake City making it into the top 10. The days of the big city being in the top 10 are going away. People are going where the crowd isn't,” said Roschelle.

San Jose is one market benefiting from real estate shifts. It was the sixth most-favored relocation market, after Los Angeles' Inland Empire, San Diego, Baltimore, Fort Lauderdale/West Palm and Philadelphia. And it was the highest-rated California city nationally for housing development prospects, ranking 32nd but well ahead of any others in the Golden State. San Jose is also the third leading US market for retail prospects and second for hotel interest.

Other Emerging Trends panelists highlighted the role of technology in real estate, both as an economic driver in the Bay Area and its continuing potential as a disruptive force industry-wide.

“We're starting to see disruption in the underlying business models on which our customers are relying, which in turn impacts their use of real estate,” said Will O'Donnell with Prologis.

For some Bay Area venture firms working at the intersection of technology and real estate, the disruption trend is an opportunity.

“Whether it's co-living or co-working, technology companies are enabling the reimaging of the use of space,” said Fifth Wall Ventures' co-founder Brad Greiwe.

He cited Priceline an example of a technology firm taking over of a part of an industry, hospitality/hotels, that it originally helped to optimize. Similar disruption threatens other sectors. “Don't be a victim of the 'Pricelining' of your real estate,” he said.

Emerging technologies, such as autonomous vehicles, will have an even greater impact on how the real estate industry functions, according to the Bay Area experts.

“Autonomous vehicles are going to disrupt more than any other technological change that we've seen since the automobile was invented. Infill self-storage will become a thing of the past, highway adjacent hotels will as well,” said Greiwe.

For the Bay Area, technology, transportation and housing affordability are connected.

“Everyone talks about what is going to happen with the car companies once vehicles reach full autonomy, but there are city blocks of real estate that are worth more than some car companies,” according to Greiwe. “To continue to be competitive in real estate, the Bay Area has to get housing affordability and policies toward emerging transportation right.”

Instant Insights /

Policy Partly to Blame for Supply Crisis

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