SummerHill CEO Robert Freed Discusses The Future Of Silicon Valley Multifamily
With home pricing rising beyond the reach of many Silicon Valley residents, demand for apartments continues to increase. Developers are building hundreds of units throughout the Valley and leasing them up in weeks.
SummerHill Housing Group is among the developers building homes and apartments throughout Silicon Valley and has 25 communities of about 4,000 homes through affiliates SummerHill Homes and SummerHill Apartment Communities.
Over 1,000 units are in the works in the Bay Area this year through SummerHill Apartment Communities. SummerHill also is working on a master planned community in Santa Clara. Recent projects include Domus on the Boulevard in Mountain View and 481 on Mathilda in Sunnyvale. The company is pre-leasing its Villas on the Boulevard in Santa Clara.
SummerHill CEO Robert Freed shared some thoughts on the multifamily market in Silicon Valley and where the market is headed. Freed, who has been in residential real estate for 40 years, has been active in various housing organizations and is on the board of directors of Bridge Housing. He previously served on the board for the Santa Clara County Housing Authority.
Bisnow: What makes Silicon Valley an ideal market for multifamily development?
Freed: Job growth drives the demand for housing. Accordingly, the job growth in the Silicon Valley, driven by the tech world, drives/supports the demand for housing. In addition, the consistent failure to produce an adequate supply of new housing (i.e. jobs/housing balance) has created an almost permanent state of pent-up demand. The situation is a basic Economics 101 case of supply and demand.
Bisnow: Why is now a good time to develop multifamily properties in Silicon Valley?
Freed: In addition to the supply/demand equation, it is also a good time to develop multifamily given that the demographics of the younger tech workers desire newer product with abundant amenities located close to jobs, services and transportation.
Bisnow: What are some of the challenges to developing multifamily properties in Silicon Valley?
Freed: Entitlement challenges, including, but not limited to, elected officials who do not have the political will to embrace the importance of producing new housing in support of our local economy, the ease at which CEQA lawsuits can be pursued with no adverse consequences to the plaintiffs and the abundance of selfish individuals (aka NIMBYs) who do not embrace the importance of new housing to the local economy, who do not understand or respect land use laws, who do not care to work in a collaborative fashion and who are prejudiced towards renters and, in particular, to residents of affordable housing projects.
Bisnow: What are some ways SummerHill has been working through these challenges?
Freed: SummerHill undertakes aggressive outreach to staff, elected officials and the community. We are proactive in offering solutions and reasonable compromises. We are extremely knowledgeable about the market, we have a high-quality, experienced team of employees and we also engage with the best consultants in our industry. We are also fortunate to be financially sound, a must in this risky entitlement environment.
Bisnow: What makes Silicon Valley an ideal market for SummerHill to develop? How does it fit within your company's appetite?
Freed: In addition to job growth and pent-up demand, our strategy is to develop solely on infill sites that are surrounded by jobs, schools, services and transportation. Clearly, this strategy is well-suited for the Silicon Valley.
Bisnow: If you had a crystal ball in front of you, what would you expect to see five years from now for multifamily in Silicon Valley?
Freed: I expect to see a slowdown in new multifamily starts over the next two to three years as a result of material construction cost increases, significant fee increases, flattening rents and more conservative debt and equity underwriting.
Hear more from Freed during Bisnow’s Silicon Valley State of the Market on Sept. 13 in Santa Clara.
