Risky business: As the real estate cycle turns, the risks of development may outweigh the opportunities
It is slated to be the tallest building west of the Mississippi. Salesforce Tower, currently under construction in the heart of San Francisco, is a 1.4 million-square-foot behemoth set for completion in 2017. But the tower is not alone. A flock of cranes dots the horizon in nearly every direction, helping to deliver the nearly 5 million square feet of office space under construction in the City by the Bay, according to theSan Francisco Chronicle.
Although the market has been bulletproof for years, and nearly half of the space under construction is already leased, none of these developers want to be one of the oversuppliers that pushes the real estate cycle over the edge, leaving them with empty buildings in a market as expensive as Manhattan.
Real estate investors are left juggling two absolutes: New buildings must be built, and the cycle must turn. But while conventional wisdom tells them not to break ground as rental growth begins to slow, pinpointing the ex