Rents in San Francisco and Oakland down at the End of 2017

Continuing the trend we first noticed forming at the end of 2016, asking rents for apartments in San Francisco and Oakland ended the year lower than at the start of 2017.

In fact, based on a comparison of nearly 2,400 listings, the weighted average asking rent for an apartment in San Francisco, including one-off rentals as well as units in larger developments such as Avalon’s new complex in Dogpatch, is currently running around $4,000 a month, which is around 4 percent lower versus the same time last year and roughly 10 percent below a peak in the fourth quarter of 2015.

And the average asking rent for a one-bedroom apartment in San Francisco is currently running around $3,400 a month having crossed the $3,600 mark in 2015.

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Powell as Fed Chief—A Win for CRE Investors and Lenders?

As 2017 comes to a close, commercial real estate total transaction volume is over $500 billion according to CoStar. Although, that equates to a 14 percent year over year decline, many forget that those levels are still higher than 2006—a banner year. Regardless, numerous industry observers are holding their collective breath. In fact, Janet Yellen began 2017 indicating a potential bubble in commercial real estate driven in part by today’s extended low interest rate environment.

In response, lenders, investors and regulators remain anxious with the possibilities of cap rates blowing out in the face of rising interest rates. But are these concerns warranted and will the nomination of Jay Powell actually lead to strong levels of commercial real estate price growth?

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Tenant Buyouts of up to $310,000 in San Francisco since 2015

Since March of 2015, when San Francisco started regulating “buyout agreements” between landlords and their tenants, a total of 772 buyout agreements have been inked and reported.

While the highest reported buyout totaled $310,000 for three tenants in the Mission back in July of 2015, the highest reported buyout for a single tenant was $250,000 for a unit on 21st Avenue in the Lake District last year.

And while the total number of reported buyouts has dropped from 319 in 2016 to 258 in 2017, as of November this year, the average buyout amount has increased from $36,839 per building in 2016 to $42,806 in 2017; or on a per tenant basis, from $22,698 in 2015, to $23,504 last year and $27,495 in 2017 to date.

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Grocery-Anchored Shopping Centers Begin to Experience Retail Headwinds

Conventional wisdom posited that grocery-anchored shopping centers would be immune from the Amazon effect. While that might be the case for now, industry insiders say grocers need to adapt—not just in light of a potential threat from e-commerce players, but also because of the increasing number of competitors in the space.

So far, online shopping—while taking a toll on department stores and the brick-and-mortar apparel retailers in particular—has not hit grocery stores as hard. Recent analysis from Morningstar Credit Ratings, which focused on Campbell’s soup, noted that online purchasing of grocery products hasn’t gained a lot of traction: it accounts for “a low-single-digit percentage of total sales.”

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Global Economic Briefing, The NAI Global Quarterly Review of The Economy

In June the U.S. economy entered its 96th month of economic expansion, the third longest in U.S. history since 1854. Odds are favorable that this period of growth will surpass #2, which took place during the turbulent 1960s (1961-1969), yet calling the takeover of the 120-month economic expansion and #1 “tech boom version 1A” from 1991 to 2001 is too early to say.

That was one of the takeaways from a recent Global Economic Briefing sponsored by NAI Global in a live webcast presented to NAI professionals and guests in mid-June by Dr. Mark J. Eppli, Professor of Finance and Bell Chair in Real Estate at Marquette University. Once a quarter, NAI Global hosts an economic outlook call featuring domestic and international experts on the economy and other business trends.

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4 Ways that Driverless Cars Could Impact the CRE Industry

Companies ranging from the big automakers in Detroit to tech firms in Silicon Valley are pouring research dollars into driverless cars, and this development is projected to completely change the future of commercial real estate. This transition creates opportunities for new investment as well as challenges for existing properties.

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Food Halls Help Urban Retail Landlords Maintain Competitive Edge

More than one-third of consumers, 34 percent surveyed in a recent AlixPartners study, said they look forward to dining out more often in the next 12 months, according to the research firm’s November 2017 update on the sector. That sounds like encouraging news for landlords around the country who are rapidly expanding food halls in urban shopping districts.

Dining out has been on an upward swing since the National Restaurant Association found that in December 2014, for the first time on record, Americans’ spending at restaurants exceeded their spending at grocery stores. Just as dining establishments are seen as a viable use to backfill vacant anchor spaces, food halls are considered the newest and hottest way to combine dining, entertainment, and even locally sustainable eating in one place.

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Greenprint Report Shows Real Estate Industry Continues to Reduce Energy Consumption, Carbon Emissions, Water Use

A new report from the ULI Greenprint Center for Building Performance shows that several of the world’s leading commercial real estate owners and managers are making significant progress in reducing energy consumption, carbon emissions, and water use in their buildings.

Since Greenprint started tracking building performance in 2009, the energy consumed by members’ properties has dropped 13.9 percent, carbon emissions have decreased 17.9 percent, and water use has dropped by 12.1 percent. The reductions occurred even as building occupancy rose, suggesting that greater space use does not necessarily cause a decline in building performance.

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4 Hot Markets Where Multifamily Looks Great for Investors

The multifamily market is facing a transition time. Transaction volumes have dropped from a record setting 2016 as rent growth is softening and new projects are coming online. Opportunities still present themselves, however, care needs to be taken to ensure the financials of a potential purchase make sense. More than any time since the bubble burst in 2009, choosing the best market for your investment is key.

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