by Jiyan Wei, BuildZoom
- Overall, San Francisco experienced 1.2% annual growth in the number of building permits issued.1
- The San Francisco remodeling and construction activity underperformed in 2013 as compared with the rest of the US.
- There was a 34% year-over-year decline in the cumulative project value for permits issued in 2013, strongly influenced by a drop in the number of large value projects.
- Most active specialty contractors in 2013 included fire protection and roofing contractors.
In 2013, the City of San Francisco issued 18,075 permits, which represents a 1.2% increase over 2012. This figure represents the highest total since the City began keeping records in 2000, although it suggests a deceleration of the growth experienced in previous years.
Permits issued in SF (by year)
A closer look at deseasonalized permit activity shows steady growth in both residential and commercial activity from Q2 2011 through Q2 2013, before a sharp decline in the middle of Q3 2013 with a rebound towards the end of Q4 2013.2
Permits issued in SF from 2011 – 2013 (by month)3
Cumulative value of permits issued
While the total number of permits issued, increased slightly from 2012 to 2013, the cumulative value of these projects represented a 34% decline from 2012.
Cumulative job value for all permits (by year)
This trend is heavily influenced by a handful of large value projects. By looking at the aggregate project value for the top 10 projects by year, it is plainly evident that 2013 did not have the big ticket projects that boosted overall expenditures in past years.
Cumulative value of 10 largest permits (by year)
In 2012, the Trinity Properties buiding at 33 Eight St and SFMOMA expansion added a combined $218 million to the commercial total while in 2011, the development of AVA (55 9th St) and the Channel Mission Bay apartment (185 Channel St) resulted in a combined total of $156 million. In 2013 however, the permit data reveals the only project with a > $50 million valuation is 183 Fremont St. One theory as to why the number of big ticket items has decreased, is that there is simply not much available land zoned for large commercial projects in SF. According to business/economic correspondent Matthew Yglesias from Slate, There’s zero possibility for sprawl inside the city of San Francisco (it’s all built out), so you either build up or you just don’t build. And the preference, apparently, is to not build. That way you preserve the existing physical plant and handle “affordability” as a question of allocating an increasingly scarce resource. With the recent executive order from Mayor Ed Lee to give priority to affordable housing construction, it is entirely possible that the total value of construction put in place will continue to decline moving forward. From a financial standpoint, it should be noted that the decrease in permitting for large commercial projects in 2013 will most likely be felt through 2014 based on our research illustrating the 12-month gap between permit issuance and revenue recognition for commercial projects.
After outperforming the national index in 2011 and running in-line with it in 2012, SF spent the majority of 2013 underperforming compared to the rest of the US when it came to residential activity.
SF Residential Permits versus National (by month)
In the commercial sector, SF spent the first half of 2013 outperforming the national index before losing ground in Q2 and Q3. In Q4 however, commercial activity rebounded while the national index dipped. Based on previous analysis, we can speculate that this convergence may have something to do with winter weather conditions that slowed growth in both the commercial and residential sectors for many parts of the US.
Top contractors in 2013
Here are the San Francisco contractors who were the most active in 2013:
Top 10 SF contractors in 2013 (# of projects)
A broader analysis of the top 50 most active contractors in 2013, reveals that after general construction and remodeling contractors, some of the most active, specialized in fire protection and roofing.
Trade classifications for the 50 most active SF contractors
Here are the top contractors based on cumulative project value:
Top 10 SF contractors in 2013 (total revenue)
Not surprisingly, volume doesn’t always translate into overall revenue. The only contractor who is represented on both charts is GCI.
Top properties in 2013
Here are the properties4 that had the most work done in 2013:
1 – Permits were acquired from the SF Department of Building Inspections, which is responsible for regulating building activity in the City and County of San Francisco. Building permits are required for any work unless it is specifically exempted by the San Francisco Building Code.
2 – To better understand trends over time, we use a probabilistic classifier (Naive Bayes) that determines whether a permit is residential or commercial in nature.
3 – To smooth out the trend line, we first deseasonalized (by class) using the last 10 years of historical data and then plotted it, using a three-month moving average.
4 – Properties with less than 2 projects were not included in the analysis.