$100/sqft to make residential projects viable? That’s quite low. They also say conversion would cost $1000/sqft, why would you need a million dollars to renovate < 100m2?
None of this adds up to me, appreciate if anyone has hard numbers for this.
None of this adds up to me, appreciate if anyone has hard numbers for this.
The easy one: $100/sqft isn't $100/sqft for each apartment, it's $100/sqft of building. That means that you have to count hallways, lobbies, elevator shafts, mechanical spaces, internal walls, etc. All that adds up.
The hard one: The $1000/sqft conversion cost. This comes down to the fact that residential and commercial buildings have very different floorplans. Commercial buildings keep the plumbing near the elevator shafts because it's more efficient, but residential buildings need much more extensive plumbing on each floor to give everyone a bathroom and a kitchen. Electrical metering and wiring also becomes a lot more complicated. You also have to do things like putting up walls and light fixtures (usually commercial tenants pay for that in the spaces they rent) and installing residential appliances. All of that adds up to a quite significant cost in a place like San Francisco, notwithstanding the costs for permits.
So you need to be able to acquire it for cheap because the costs and risk to convert are estimated at $1000. These aren’t just construction costs, but things like hiring an army of bureaucrats to get the approvals from the city, and the possibility that you might have to wait several years to get started while the paperwork gets moving.
Think of it this way: you have the opportunity to buy a house, except you can’t live in it for an indeterminate amount of time, it needs some renovations, you might have to rent the basement out at below market rates, and you still have to maintain it and pay the mortgage for however long it takes to sort all this out.
So how cheap does that house have to be before you’re interested (and can talk a bank into backing you).
See "Average Construction Costs of Single-Family and Multi-Family Residential Buildings Per Square Foot in the U.S." on [1] for costs within major cities, you will see that costs are much higher than that, even if not 1k psf.
[1] https://www.togal.ai/blog/the-average-cost-to-build-a-house-...
"...I note that the cost of housing per square foot in Biloxi, Mississippi, one of the poorest cities in the country, with a median household income that is 60 percent below that of San Francisco, is $139 per square foot. And this is for a city that is not only poor but is chronically at risk of major flooding, which raises insurance costs and reduces home values. "
So, San Fran residential real estate needs to be 28% cheaper than Biloxi?