ROUGHLY two decades ago,during an earlier Internet start-up boom,many entrepreneurs and fast-typing coders and engineers set up shop in a still-gritty area of this city:South of Market Street.
The young tech crowd rented—and sometimes bought—in commercial buildings in this former warehouse area,converting them into"work-live"spaces where they operated their nascent companies and slept(once in awhile).
The boom-and-bust cycles in the tech sector move quickly,and the pace of constant reinvention and innovation is relentless.
The same is true of tastes in real estate.Today a new generation of tech dreamers is back in the South of Market area.But this time they are breathing life into a start-up wave not previously seen in San Francisco:high-rise condo living.
A clutch of new condo buildings and condo-hotels,some with stunning views of the San Francisco-Oakland Bay Bridge and Twin Peaks,have sprung up downtown in the past five years.For what would be considered modest prices in Manhattan,they are offering a full-service lifestyle that locals have traditionally steered away from,preferring the single-family homes traditionally available in the City by the Bay.
In the late 1990s,if someone wanted to live in a high-end condo,the options were almost nonexistent."There wasn't any signature building that people said,'I gotta have it,'"said Max Armour,a real estate agent with TRI Coldwell Banker.
Today there are at least two,both a few blocks south of Market Street.In terms of quality,amenities and V.I.P.neighbors,the 60-story Millennium Tower is San Francisco's version of 15 Central Park West,or perhaps the yet-to-be-completed One57.
At Millennium,tech millionaires from Google,Twitter,Zynga and Salesforce mingle with celebrity residents like the 49ers legend Joe Montana and the chef Michael Mina,who runs RN74,the restaurant in the building.Thomas Perkins,the venture capitalist,lives in a 4,500-square-foot penthouse he bought in 2009 for$9.35 million.
Just up Mission Street from the Millennium,and nearer the financial district,is the St.Regis,a more low-key building,though also lauded for its refinement.Last December a 17,100-square-foot penthouse there sold to a Hong Kong family for$28 million,said Gregg Lynn,the broker at Sotheby's International Realty who represented the sellers.
Other buildings south of Market have been selling swiftly,including Madrone,or have sold out,like Infinity.Developers have taken advantage of zoning regulations in the newer neighborhoods of South Beach,Mission Bay and Rincon Hill to erect taller towers than would be allowed in better-established residential pockets of the city.Millennium Tower,at 645 feet,is San Francisco's tallest residential building.
"There is a whole new generation of wealth that has found its way into San Francisco,"said Richard G.Baumert,a partner with the New York-based Millennium Partners,which developed Millennium Tower."Whether through stock options or whatever,there has been this influx of buying from the tech sector that has had a positive impact on the whole market."
Some of the wealthiest tech buyers have ranged beyond South of Market and bought trophy properties throughout the city.
In February Jack Dorsey,a founder of Twitter and Square,bought a two-bedroom house perched on a cliff overlooking the Pacific for$9.99 million.A few months later Mark Pincus,a founder of Zynga,paid$16 million for a seven-bedroom 11,500-square-foot house in the Pacific Heights neighborhood.Jonathan Ive,the Apple executive responsible for the design of the iPhone and iPad,bought an English-style manor on"Billionaire's Row"in Pacific Heights for$17 million.
The recent fall in stock prices for companies like Facebook and Zynga hasn't done a whole lot to slow the buying,brokers say."If that hadn't happened our inventory probably would be at zero now,"Mr.Lynn said.
The inventory in the San Francisco area,which includes the East Bay,dropped by 42.2 percent over the past year,the biggest drop after Sacramento among the country's 30 largest metro areas,according to Zillow,the real estate Web site.
As for the young tech professionals,the catalyst for their condo purchases—often in developments South of Market—is San Francisco's exceedingly tight rental market.What the buildings lack in proximity to supermarkets and night life they make up for with an easier commute to tech companies in Silicon Valley,which can take up to 90 minutes during rush hour.A train station for lines running south to the valley is in Mission Bay,as are on-ramps for the expressway.
"It's like living in TriBeCa and working in New Jersey,"said Alan Mark,president of the Mark Company,a real estate marketing and sales firm.
Both of the newer neighborhoods have benefited from A T&T Park,which opened for Giants baseball in 2000 in South Beach.Mission Bay,a 300-acre area that was previously a rail yard,was largely ignored until the ballpark spurred developers to bet on it.A cluster of biotech companies have since moved in,and a new medical center for the University of California,San Francisco,is currently under construction.
Mayank Mehta and his wife,Ashini Desai,both 30,bought a two-bedroom apartment in Madrone in Mission Bay earlier this year after their landlords at a nearby building told them that their rent of$3,000 a month would jump by 50 percent.
Mr.Mehta works at Capriza,a Palo Alto-based start-up with 28 employees that makes custom mobile applications.
He and his wife,an investment banker,prefer to live in the city rather than in Silicon Valley,he said,because most of their friends in San Francisco—and most of Capriza's employees—haven't begun to start families.
Mr.Mehta says they chose Madrone because of its investment potential and easy access to Palo Alto,paying just over$1 million for the apartment,which has about 1,600 square feet.Prices in Madrone range from$500,000 to about$2 million.
"Over the last three years,"Mr.Mehta said,"with the Facebook I.P.O.,and the Pandora I.P.O.and LinkedIn and a bunch of other companies coming in,rents shot through the roof.We found it was economically better to be owners than renters."
Madrone's developer,Bosa Development of Vancouver,bet big on Mission Bay when it began acquiring sites in the area some eight years ago.When the company started construction on Madrone in 2010,Nat Bosa,Bosa's president,"was using his own funds,because he believed that by the time he delivered,the market would be better and there would be no inventory,which is exactly what happened,"Mr.Mark said.
Since starting advance sales a year ago,the 16-story Madrone has closed on more than half its 329 units,and has been averaging about 30 sales a month at$750 a square foot,said Andrea Jones Bosa's vice president for Northern California.
Millennium Partners,the builder of the Ritz-Carlton on Central Park South and the Four Seasons in San Francisco,also had to weather the storm of the financial crisis with Millennium Tower,which began selling in the fall of 2007.
"Our timing couldn't have been worse,"Mr.Baumert said.
Initial sales were strong,but everything changed in late 2008.The developer dropped prices by 15 percent in January 2009,shortly before the building opened,but sales didn't begin to pick up until in 2010.Since the second half of 2011,tech buyers have been leading the way,with sales averaging about$1,100 a square foot,he said.Now the 60-story tower and its adjacent 11-story companion building,designed by Glenn Rescalvo of Handel Architects(which helped design the World Trade Center memorial),have just 45 of 409 apartments left to sell,Mr.Baumert said."There was a lack of high-end product in the city,"he said."We felt this was a perfect opportunity."
The newer condo buildings offer resortlike amenities.Millennium Tower has a 20,000-square-foot club level with a health club;a 75-foot pool;a private dining room served by RN74;a tasting room and wine cellar;a screening room;and a children's playroom.
Millennium has tried to go one step further in offering residents a lifestyle that never existed South of Market before—or really anywhere in San Francisco.Its"La Vie"calendar of events has included"share your bottle"wine nights,summer concerts on the terrace and"fireside chats"with prominent locals and building residents like Mr.Perkins and Mr.Montana.
Who knows?With all this mingling,maybe a few new start-ups will be born.
