The Metropolitan | A Year In Review

The Metropolitan was subjected to some difficult news at the turn of the new year: California’s statewide rental restriction policy AB 1482.

Being the only building in surrounding blocks built more than 15 years ago (the cut off is 2005), the Metropolitan stands to be in a disadvantageous position compared to competing buildings like One Rincon Hill, Infinity, The Harrison, LUMINA, etc. The bill mandates a 5% year over year rental increase maximum, plus inflation, while developments constructed post-2005 have the leniency of listing rentals at market value. This will likely deter investors from seeking investment properties in the building due to the gap between rental values in comparable buildings as the years pass, but only time will tell.

The Metropolitan had a huge bounce-back year after lack-luster 2018. The 12 sales at an average of $1,088 per foot in 2018 was topped by 14 sales at $1,241 per foot last year. No, the building did not appreciate ~15% in a single year, nor did the market accelerate at that speed. The likely cause of the 2018 lull (which looked similar in The Infinity) is the wealth of new development in the local neighborhood. 

MIRA and the Avery stole buyer attention when they introduced their units to the market in late 2018, with buyers waiting to see where the price of homes would land. The Harrison also likely drew buyer attention away from The Met. As buyers were faced with prices north of $1,500 per foot for most units in these new developments, coupled with the Mello Roos tax at The Avery and MIRA, attention quickly swung back to the staple landmark buildings. 

One Rincon Hill saw a similar 2018 to 2019 as the Met, indicating the wave of new development likely halted all resale attention in 2018. Homeowners are now competing with new development condos as buyers are coming to expect the ‘like new’ feel to any and all properties in Rincon Hill/South Beach. Owners looking to cash out after a tremendous 15 years (or less) of appreciation are advised to entertain light remodeling of floors, bathrooms & kitchens, or at minimum a deep clean and high-end staging. 

1 Bedroom sales in 2019 showed the building commanded a respectable ~ $1,260 per foot. Being so conveniently located to San Francisco’s financial district, many buyers we saw circling in 2019 we’re looking for a second home in the city to off-set the horrific commute now synonymous with bay area living. Silicon Valley and East Bay homeowners saw the opportunity to purchase property at significantly less value than the surrounding new development buildings and capitalized on the relatively inexpensive investment.

2 Bedroom homes traded exceptionally well in 355 1st Street, with an astonishingly low Days On Market average of just 12. When compared to the neighborhood average of X, you can see just how significant the number is. Buyers kept a close eye on high-floor 2 bedroom homes in 2019, as a 23rd to 28th floor home with views trading for less than $1,500 a foot was a relative steal compared to the $2,000 plus per foot new development was asking. 4x homes sold for ~ $2M or above (One was $1,998,000, but that counts).

Pictured above is an unstaged 28th-floor penthouse that sold for $2,112,500 in March of 2019. Typically the high-end condo market struggles to sell units at record prices without staging as San Francisco buyers expect aspirational, but the demand for 2 bedrooms was high enough to off-set that need.

2020 is off to s steady start with 2 homes already closing in the building above $1,300 per foot, and another 2 active listings looking for their next owners. Expect another moderate turnover year in The Metropolitan with mortgage rates being at record lows as banks continue to try and mitigate the potential of a market downturn.