Fremont, California (EastBayDaily) — With real estate prices soaring all across San Francisco, landlords are increasingly opting to build office buildings rather than buying them, says full service real estate and property management firm, ACL Real Estate and Property Management. The result is that the country is seeing the highest amount of development by REITs in 2014, as compared to the past decade.
Office real estate investment trusts (REITs), led by Kilroy Realty Corp, Vornado Realty Trust and Boston Properties Inc, intend to invest somewhere in the region of $11 billion in fresh projects, most of which will be focused on areas that see the most investor and tenant demand, such as San Francisco and New York. Currently,office real estate prices have soared beyond the previous peak levels, driven to a large extent by sovereign wealth funds that are willing to settle for lower yield in the search of safe investments. However, since REITs have shareholders to answer to, they need higher returns. Today, they feel that building is a better option than buying, given the competition from institutional buyers.
According to article published by Bloomberg on July 8, 2014, among the projects slated for construction in 2014 are a $1.13 billion tower to be built by Boston Properties in San Francisco. This building is expected to be the new headquarters for Salesforce.com. Kilroy Realty, on the other hand, has five projects in San Francisco, given that the city has been the best performing office market in the United States for the past four years. Kilroy intends to invest $1.5 billion in developments in the city and expects returns of about 7.5%.
“New projects always entail risks, such as construction costs and finding enough tenants to make it all worthwhile,” says a spokesperson from ACL Real Estate and Property Management, while adding, “That is probably why Kilroy Realty has over 62% of its projects under construction already pre-leased.” Despite major new construction projects, office rents are expected to rise in San Francisco, going forward, especially in the primary business districts, according to ACL Real Estate and Property Management. One way to ensure that the right tenants are found and that vacancy in minimal is to enlist the services of an experienced property management firm, the company says. “With years of experience in San Francisco’s East Bay and Peninsula regions, we have helped numerous landlords with a hassle-free experience of renting out their property.”
About ACL Real Estate and Property Management: As one of the fasted growing full service real estate and property management firms in the East Bay and Peninsular regions, ACL Real Estate and Property Management has a proven track record in quality service and reliability. Apart from offering full-scale real estate brokerage, the company also provides comprehensive property management services to ease the process of selecting tenants, maintaining the home and ensuring timely rent collection for homeowners.