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Boutique condo buildings swoop into sizzling San Francisco housing market


Developer Sean Sullivan bought a former gas station at 15th Street and South Van Ness in 2008 as the nation’s economy was collapsing, but he closed on the property anyway.

A lot can happen in six years: the Mission became an “it” neighborhood and the city’s condo market is now on fire just as Sullivan is weeks away from completing 1515, a 40-unit condo project on the site.

The same goes for other developers who risked building boutique condo projects over the past few years and are now poised to sell units during one of the hottest condo markets in recent memory.

“One gamble for us was that South Van Ness does not have a lot of condo development,” said Sullivan, founder of JS Sullivan Development, which has built other condo projects on Valencia Street — before it was cool — and at 29th and Mission streets. “Coming out of the recession, from the investment standpoint, there’s a desire for and recognition of smaller projects.”

In many cases, developers found that it was easier to find sites, entitle and finance small to medium condo projects that will start sales before the year’s end. That includes buildings such as the 47-unit 8 Octavia in Hayes Valley, Trumark Urban’s 27-unit Amero project in Cow Hollow, the 26-unit 870 Harrison in SoMa, the 33-unit 35 Dolores from Lightner Property Group and the 39-unit Millwheel project in the Dogpatch that started sales earlier this month.

In total, those projects represent a few hundred units — not much compared with Bosa Development’s 267-unit Arden in Mission Bay and Tishman Speyer’s 656-unit Lumina in Rincon Hill also launching sales in 2014. Still, smaller projects fill a niche in the market.

“These boutique properties bring new homes into more established neighborhoods,” said Paul Zeger, a principal with Polaris Pacific, a condo marketing and research firm. “The scale is designed to complement the existing streetscape and to engage the neighborhood amenities.”

Throughout the condo market, high buyer demand and low inventory are pushing up prices toward averages of more than $1,000 per square foot, far above developers’ projections when they entitled their sites.

Units in 1515, designed by Stanley Saitowitz of Natoma Architects, will start at $500,000 for a studio, in the $700,000s for one-bedrooms and above $900,000 for a two-bedroom. Sullivan expects the project to sell out in three to four months.

“The project was underwritten for less,” Sullivan said. “The market has done a complete 180 in the past year and a half. Our projects weren't contingent on a $1,000 per square foot market.”

In 2012, Sullivan sold 30 units in 299 Valencia in about two months for an average of $950 per square foot — signaling the condo market’s rebound after the recession. Earlier this year, Sullivan’s firm completed Blanc, a 35-unit building at 1080 Sutter St. that sold out in a few months.

In Hayes Valley, developers DDG and DM Development plan to launch sales this month at 8 Octavia, a building designed with a modern aesthetic also by Saitowitz. The developers began work on the project back in 2006 after city officials requested proposals for properties in the place of the former Central Freeway.

“Our interest in Hayes Valley was really the opportunity to try and transform a neighborhood,” said Mark MacDonald, principal with DM Development. “It is an exciting opportunity to take something that been sitting vacant for a longtime and bring something new and fresh.”

The developers of 8 Octavia are still finalizing their prices for the units, but expect them to be above $1,000 per square foot. The building has 32 two-bedrooms with the remaining 15 consisting of studios, one-bedrooms and three-bedrooms ranging from 400 to 1,800 square feet.

“I wish I could say we had the foresight to know we’d sell the units over $1,000 per square foot back in 2010,” MacDonald said.

The developers are also working on two other projects in Hayes Valley including 400 Grove, which is under construction, and 450 Hayes, which will start construction later this year. Combined with 8 Octavia, DM And DDG plan to deliver a total of 150 units in Hayes Valley by the end of 2015.

Joe McMillan, chairman and CEO of DDG, said the job growth in Mid-Market — home to firms like Twitter, Square and Uber — pumped up Hayes Valley into even more of a destination with a thriving restaurant, bar and shopping scene.

Job growth and the wave homebuyers who want to live in the heart of San Francisco don't appear to be waning, and neither do condo prices, McMillan said.

“What we thought was going to be a good market for Hayes Valley turns out to be a great market,” he said. “We couldn’t have anticipated the transformation that has happened.”