Livermore Cuts Ties With Lennar in Downtown Mixed Use Development

The saga continues… City Council did not extend the 9-month contract with Lennar Multi-Family Communities, ending the year long relationship. As some might recall, this time last year a number of developers were asked to present plans for the former Lucky Supermarket site, now a half dirt parking lot between First and Railroad Avenue. Lennar was selected as the developer who would then work with City staff, Council, and the community to come up with a final plan. Unfortunately, Lennar didn’t get that opportunity due to the November elections. With fresh Council members, the project is back to square one.

Development is always tricky, you are asking a community of people who already have homes in that area to decide on more people, more traffic, more impact on services; rarely does a community gather to encourage more housing and more people when their needs are met. While I do believe the project should be carefully planned to reflect the actual needs of the community, the wants and priorities of those closest to the situation may not actually understand the real needs of the greater market and what is actually marketable.

For example, we know Livermore is a sought-after community, filling apartments and condos is no problem. However, we have no idea if a 130-room hotel will ever sell out or if a 75,000 square  retail center will find an anchor store. In fact, Livermore traditionally has not supported big-box retail outside of the “freeway zone” and vacancy rates of the local hotels are not low enough for hoteliers to be attracted to building a new facility, downtown or otherwise. The market will dictate what makes economic sense, someone just needs to be listening.

Link to EBT Article

Advertisements

Commercial Building and Land Sales in Livermore Point Toward Recovery

 The past quarter did make way for positive activity in the downtown area with a number of new restaurants taking over vacant spaces. Shopping centers and strip centers have not been so lucky. Besides the former Mervyn’s space being back-filled with Petco, TJ Maxx, and Big Lots, overall retail activity in Livermore pales in comparison to neighboring communities. As for land sales, those have been non-existence since the market turned. Development, for get about it. No, Paragon Outlets do not count, that deal had been in the works for 10 years.

Is there hope? Maybe. A few month back you may remember the former AAA building on Kitty Hawk Road was sold to a group of investors who then leased the 80,000 square foot building to 24 Hour Fitness. According to our stats here at Lee & Associates, activity of industrial buildings and condos is up three-fold from last year. Don’t believe me? How about these for the top 3 industrial deals in town:

1. Greenville Business Center – 4 buildings totaling 475,000 square feet

2. Best Buy Distribution Center – 1 building totaling 280,000 square feet

3. Johnson Controls Building – 1 building totaling 100,000 square feet

More good news? A piece of land that was slated for residential development has sold to a potential developer. Why is this one 5 acre parcel a big deal? Because this 5 acre parcel signifies that developers see a demand and more importantly, can make a profit on new construction.

See those shiny new condos? The ones you think are over priced… take into account the cost of the land, the cost to construct, the hundreds of thousands of dollars in fees, real estate commissions, and the cost to hold the condos when they aren’t selling like hot-cakes. How much do you think that developer is squeezing out of each sale? In this market, not much if anything at all.

Being under water on a property isn’t just an issue for the average home owner; developers and commercial building owners are all in similar positions. For a developer to build there has to be an equilibrium between the total cost to construct and the present day resale value.

The 5 acre parcel sold lies between First Street and Old First Street. The future development is adjacent to the Pinn Brothers condo project completed back in 2005, Palasage. See the picture below, the red outline depicts the parcel.

A number of years back this piece of land was rumored to be a Pulte Homes development who in the end never pulled the trigger on the land purchase. The project was going to consist of multi-story condos, similar to those across the street.

Although the sale activity and a land sale does point toward recovery, don’t hold your breath on prices returning to pre-2008 levels or activity levels to suddenly jump. It is going to be a long road and with an election year in sight, I will be placing my bet that activity will remain steady, perhaps even decline a tad.