Approved by the City last year, the plans for a 24-unit development to rise up to six stories in height upon the former CrossFit site at 1228 Folsom Street and its underlying Western SoMa parcel hit the market earlier this year priced at $6.95 million or roughly $290,000 per entitled unit, not accounting for the value of the project’s 1,100-square-foot restaurant/retail space fronting Folsom.

And with the demolition permit for the site having been issued and the building permit for the project nearly secured, the asking price for 1228 Folsom Street has just been reduced by 14 percent to $5.995 million or roughly $250,000 per entitled unit.

As we noted last week with respect to fingering a rise in construction and inclusionary housing costs for the slowdown in local development activity: “Don’t forget a rapid escalation in land costs, driven by competitive bidding between developers and justified by expectations for continued escalations in sale prices and rents, which hints at a couple of ways said logjam could loosen.”

Keep in mind that market-rate developers were paying an average of under $200,000 per entitled unit for land in San Francisco less than three years ago.

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Comments from “Plugged-In” Readers

  1. Posted by oh my

    Wrong time in the current development cycle. Can’t wait to see the hub monsters units come on line just as the national, state and local economies are contracting.

  2. Posted by spencer

    this should be zoned for 15 floors

  3. Posted by bachman_erlich_overdrive

    So, cut from ridiculous to crazy. Won’t sell now either….

  4. Posted by Dave

    There are about 1900 entitled units on the market in small to large projects. That itself will put downward pressure on what these entitlements eventually sell for. Many investors who bought at exorbitant prices will likely end up taking loses. That said, even in a down market such as is happening with condos, there is money to be made. Some developer(s) out there will grab some of these entitlements at “bargain” prices and, if they are willing to sit on the project for up to a decade, they may do well building at that time. It’s likely that investors scouting for bargains won’t bite until after the fall election as that has potentially huge implications for residential development in SF.

    • Posted by bachman_erlich_overdrive

      FWIW: if you have to sit on a project for a decade to make money, you haven’t paid a “bargain” price.

    • Posted by SFrentier

      Dave, most of the ‘entitlement only’ projects make money. Because 1- they paid much less for the un-entitled land or 2- they have owned it for years. It’s just that before many original owners were also doing the actual development itself, and now some don’t want that risk.

      • Posted by Dave

        Agree. My comment referred to entitlements of a recent nature. In the past few years when developers paid north of 200K/unit when not too long ago the norm was under 200K. Irrational exuberance – it is these recent entitlement efforts which may well lose money for the investment group. One prominent entitlement deal maker I know got out of Bay Area entitlements in 2015. About the time his last local entitlement sold at a large profit for investors. He saw what was coming and shifted to arranging Reno entitlements which are coming online now. But Reno has gotten too frothy for smaller scale entitlement groups and this person is moving on from Reno to other markets.

        It’s hard to understand some of the prices paid in the last few years for entitlement efforts. it made no sense to some of us given the market dynamics which started to shift in 2014/2015 and now seemingly are coming home to roost.

        • Posted by SFrentier

          $200k/unit is for ready to build/already entitled land. Those got frothy as condo prices stabilized and construction costs have increased. I’m talking pre entitled land, meaning those investors made money entitling and the selling at $200k/ unit.

  5. Posted by Serge

    I thought we were done with this sort of “design.” Already looks dated and bland.

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