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New: Parker Place, now "Parker", an Investor's Dream? (or not)

Gale Garcia
Friday December 16, 2016 - 12:04:00 PM

The project formerly known as Parker Place consists of two big boxes at 2598 and 2600 Shattuck Avenue, with smaller structures under construction behind them. Only 2598 Shattuck, containing 38 rental units, is complete so far. Its ads proclaim "Parker is that thrill you feel when inspiration strikes." These ads have been repeated multiple times per day on Craigslist since June, with asking rents of $4,150 for two-bedroom apartments, and similarly stratospheric rates for the smaller units.

Apartment seekers appear to be less than thrilled. At night, the building still looks spooky dark. Other than lights in the stairwells and hallways, and in the chicly-staged unit featured in the ads, I have only seen a few lights on, ever. 

Maybe 2598 Shattuck will lease up quickly once the holidays are over. But there are 117 additional units yet to open in the Parker project, at which time they too will be seeking luxury tenants. And serious competition will arrive in the Spring, when 99 units open in a six-story project at Shattuck and Dwight, two blocks north (and that much closer to the University and the downtown.) Moreover, nearly every big rental box in Berkeley is advertising at a furious pace, with many offering one month's free rent to entice applicants to choose them over the multitude of similar options. 

Who owns Parker? In a press release of July 31, 2014, Deutsche Asset and Wealth Management (DeAWM), a division of Deutsche Bank, announced that it had acquired the project on behalf of one of its institutional clients. DeAWM's investors include "governments, corporations, insurance companies, endowments, retirement plans and private clients worldwide." I doubt we'll ever learn who (or what) acquired Parker with the expectation that it would "produce excellent returns … throughout the lifecycle of the investment." But I have to wonder if this unknown entity is a happy camper now. 

The press release quoted Todd Henderson of DeAWM, "Parker Place is a high-quality property in a very desirable location that boasts one of the tightest vacancy rates in the nation." That vacancy claim may have been true in 2014, but two and a half years later, with hundreds of new "luxury" apartments in Berkeley clamoring in unison for well-off tenants – I doubt that it is true now. 

On the first Sunday of December, the Parker site was decorated with seven ad banners for the apartments and the future high-end gym in 2600 Shattuck. There were also two leasing ads on the sidewalk – and a sign twirler! 

Beyond the relentless advertising by most of the rental developments in town, there are other signs that investors should consider looking elsewhere for the "excellent returns" they have come to expect from every hulk of "luxury" housing they could score. Asking rents are dropping in the most expensive markets in the country. See "The Great Unwind Unravels Hottest Rental Markets in the US" [

Furthermore Sam Zell of Equity Residential (EQR), who has a reputation for exiting markets at just the right time, has been trying to unload his Berkeley holdings for over a year. As far as I can tell, only one Berkeley EQR property has been successfully sold. 

While there is a severe housing crisis in Berkeley for people with modest incomes, there is no dearth of "luxury" units, available only to those with ginormous incomes. I believe that there is already a glut of such units. With over a thousand more in the pipeline, this excess will continue to grow. Investors might be in for a surprise.