These New Condo Developments Pivoted To Rentals In 2022

San Francisco is no exception from the the deluge of macroeconomic challenges rocking real estate markets nationwide this year. Still reeling from a pandemic-induced exodus of younger affluent buyers, the city’s condo market is feeling the pain especially. And as it concerns the developers of new construction buildings in once-bustling neighborhoods, it all is necessitating a change of plans.

Six months ago, we reported that Le Centre — an aptly named boutique development of 24 studio condos located at a nexus of San Francisco neighborhoods — had made the switch from sales to leasing. It was preceded by another new condo building, The Quinn, which subsequently returned with a hybrid model of both sales and leasing. To date, another two developments, OneEleven and Fulton 555, have followed suit, repositioning some or all of their available inventory to rentals.

Here’s the run-down on what happened and how it’s going.

Le Centre, situated in the northwestern reaches of SoMa at 42 Otis Street, was positioned to be an easy sell with home prices starting under $500K. That certainly would have been the case in the pre-pandemic market, at least. But as interest rates surged and recession fears spread in the first half of 2022, not even price reductions would lure buyers to these studios. Since the developer cancelled the listings in May, several units have resurfaced as furnished rentals with flexible lease terms.

The Quinn, sited at 345 8th Street in the heart of SoMa, originally began selling homes back in late 2021. By mid-February 2022, however, the developer had withdrawn its listings from the MLS and cancelled all existing sales contracts, citing a failure to achieve their desired prices. After debuting a leasing effort, a handful units were again listed for sale in June accompanied by new, higher prices. One such unit quickly went under contract, and the other four have been temporarily withdrawn.

Next month will mark three years since sales commenced at OneEleven, another SoMa development at 588 Minna Street. For-sale listings continue to be churned on the MLS with periodic price reductions, but so far barely one-third on the 39 condos have sold. Units repositioned for lease first appeared this past summer and the effort was stepped up significantly in October — so far without much success.

Source: SFAR MLS

With just 19 condos to go until Fulton 555 in Hayes Valley would be completely sold out, this development is the latest to withdraw its offerings in favor of going the rental route. It’s been a long and bumpy ride for the developer going back more than seven years. Beginning late last month, a handful of the remaining units reappeared on the MLS for rent — and two of them have already been leased, including a 1-bedroom listed at $4,500/month.

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