By Sharon Simonson
Rising apartment rents and a receptive city council are fueling a Walnut Creek apartment-building boom that would expand the ritzy community's rental-home stock by nearly 20 percent.
Investors in the East Bay city acknowledge the rush of additional supply but say they are largely unworried, given a dearth of recent construction, the projects' staggered deliveries and tenant demand for Walnut Creek life.
Developers are delivering a raft of new urban multifamily rental housing nationally and regionally, propelled by available financing at low interest rates and the giant millennial generation's coming of apartment-age. At the same time they are eyeing purely local phenomena, including expensive and rapidly rising rents in San Francisco and the relative discount available in not-so-distant Walnut Creek.
The town of 65,000 punches above its weight in urban amenities including luxury-goods shopping, dining and culture. Plus, with BART access, residents can get to San Francisco in half an hour for work or other purposes, developers said. Neighboring East Bay cities are not seeing the same interest: "There is not an apartment boom in Concord," said Edward Del Beccaro, managing director of Transwestern commercial brokerage's Walnut Creek/East Bay office.
To make way for the new apartments, developers in many cases are demolishing existing properties — an eight-story office building, a motel, the former Longs Drug corporate headquarters, and even some single-family homes, according to Transwestern research.
"Walnut Creek is really the gem of the East Bay. For a 35-minute BART ride, it is well worth the money," said Bradley Griggs, founder and president of Danville's CenterStreet Development LLC, which is teamed with Blake Hunt Ventures at The Landing, 178 apartments adjacent to the BART station. The developers expect to start construction in the second quarter of 2015.
The city has encouraged greater downtown development density for 25 years with limited market response until now, said Planning Manager Steve Buckley. The town attracted no new apartment-project construction larger than 50 units in the four years from 2010 through 2013, though 543 units came to market in 2009, according to multifamily-industry tracker RealFacts LLC.
The new supply is divided among seven projects with more than 1,100 new apartments. That is against a current apartment count of 5,952, according to RealFacts.
"(Walnut Creek) is a place where someone who is 30 years old would feel comfortable living. It was a lot sleepier than that 15 years ago," said Robert Freed, president and chief executive of SummerHill Housing Group, the San Ramon developer completing the largest Walnut Creek project, Brio, with 300 apartments.
The company has targeted a demographic spectrum, including San Francisco workers looking for rent relief, commuters traveling south to the large East Bay business parks or north toward Sacramento, and empty-nesters. Freed expects the first residents in late October; a leasing office is open. The décor, he said, "is tasteful but not trendy."
Average Bay Area asking-rents have risen nearly 43 percent since 2006 to $2,145 a month, according to RealFacts. San Francisco leads that average growth rate by nearly 2 percentage points, and at $3,233 a month, its average asking-rent eclipses the region's. Conversely, the growth of Walnut Creek's average asking-rent lags the regional growth rate by more than 4 percentage points. At $1,520 a month, a Walnut Creek studio apartment is $1,000 a month less than a comparable unit in San Francisco. In 2006, the difference in price was less than $500 a month.
Dallas' Mill Creek Residential Trust LLC is leasing The Gantry, 105 new apartments in San Francisco's Dogpatch neighborhood. Next spring, it hopes to begin leasing at Modera on North Main, 126 apartments on Ygnacio Valley Road and North Main Street in Walnut Creek, said David Fiore, Mill Creek's Northern California managing director.
In San Francisco, its typical residents are tech-industry workers in their mid-20s to mid-30s, often seeking good access to U.S. 101, U.S. Interstate 280 and Caltrain commuter rail, he said. In Walnut Creek, they expect renters from their mid-20s to their early 40s, including commuters to San Francisco and East Bay workers. The company has garnered rents of $5 a square foot in San Francisco, meaning a 1,000-square-foot unit commands $5,000 a month, and anticipates Walnut Creek rents of $3.25 a foot to $3.50 a square foot.
"There is a group of people who like the Walnut Creek lifestyle. The weather is a little warmer, and you can still walk to restaurants, boutiques and the Apple store without the hustle and bustle," Fiore said.