Big Tech Throwing Big Money at Housing Crisis

It seems every week we’re hearing about another BILLION dollars or more coming into the Bay Area housing market.

Most recently it’s Apple with $2.5 billion, one-upping both Facebook and Google’s earlier $1 billion each. Amazon and Microsoft are doing the same in Seattle.

Why is this a “trend” though? Why is there a tech “arms race” on this issue? The answer is one of the simplest Things You Learned in Kindergarten lessons:
 You Break It, You Buy It. 

Imagine the span of about 18 months from late 2007 to early 2009: 1) Apple introduces the iPhone; 2) Google releases the Chrome browser; and 3) Facebook hit critical mass, shifting from a little campus thing into a real social network and brand platform.

That’s when the world changed. Since then 500,000 tech jobs have been created. Every one tech job yields five non-tech jobs. And yet, only 50,000 new homes have been built. A recent McKinsey report estimates that 3.5 million new homes are needed by 2025 to close the gap.

So tech brings in thousands of bodies, throws tons of money at them, and demand+prices skyrocket. Now they’re throwing more money at the problem they helped create.

But money alone isn’t enough, according to experts who say the answer is “a combination of relaxed suburban zoning and permit regulations from local governments, aggressive home building over the next decade, public transportation alternatives, and a wider array of housing options beside single-family homes.”

And this is why we need to talk to you. 

The answer is taller multifamily properties, preferably near transit centers. So what are you sitting on? Ask yourself: 

  • Do you have a property near a BART or CalTrain station? Or major bus line?
  • If you could get zoning changed, could your current property be developed into housing? 
  • If you could get height limits changed, do you have a property that could be a higher-rise multifamily site? 
  • Could you get access to any of the $4.5 billion earmarked by tech to improve housing? 

Governments are ready to adapt, and you might have an ideal situation for a developer able to navigate City Hall. Contact us, and let’s look at all the commercial real estate investment opportunities that you might benefit from as the rush to build housing continues. 

Market Pulse: North Bay, November 2019

It’s been said that “numbers never lie.” So while we may feel like our day-to-day work keeps our finger on the pulse of the Northern California commercial real estate market, it’s always good to look at the numbers and see what’s real.

So every month we scour the data in each of the regions NAI Northern California covers and determine the health of our primary markets in office, retail, industrial and multifamily properties. We check four indicators in each asset class:

  1. Current Inventory
  2. Under Construction
  3. 12-Month Net Absorption
  4. Vacancy Rate

Here below is our November 2019 report for the North Bay, which we’ve also compiled into an eye-friendly infographic. Follow our blog, social media feeds, or subscribe to our newsletter for monthly updates to this data, and for our companion reports on San Francisco, the East Bay, and the South Bay.

The Data

Office Properties: This month the North Bay office market’s inventory is at 40.8 million sq. ft. and holding flat with approximately 150,000 sq. ft. under construction, the same as last month but projected to decline. The 12-month net absorption rate continues its erratic pattern, at -7,300 sq. ft. and expected to go back on the decline. The vacancy rate is at 8.2 percent, slightly down from October and expected to hold there.

Industrial Properties: For the industrial market, 105 million sq. ft. of space is in the inventory, slightly up from last month but expected to increase. The space under construction is the same as October, at 2.3 million sq. ft. of industrial space and projected to rise. The 12-month net absorption is way down, at 77,000 sq. ft. compared to October’s 222,000 sq. ft., and the vacancy rate is at 4.0% and declining.

Retail Properties: There are 65.7 million sq. ft. of retail space available, slightly less than last month and projected to increase. The sq. ft. under construction is at 105,000 sq. ft., up from October’s 104,000 sq. ft., but on a downward trend. The 12-month net absorption rate continues to plunge, now negative 87,000 square feet. Vacancy rates are up slightly from last month and the month before, at 3.8%, and are expected to continue to rise.

Multifamily Properties: The multifamily market is holding steady at 60,000 units available in the inventory, but that number is projected to increase. Construction is expected to slow, at 542 units (the same as September and October). The 12-month net absorption rate averages just 26 units across the North Bay area and is expected to rise, with a steadily rising vacancy rate of 5.6 percent.

The North Bay market includes Santa Rosa, Napa, Vallejo, Fairfield, San Rafael, Marin, and more. For more detailed updates or to find out how the North Bay’s submarkets are doing, contact one of our advisors. Whether you’re interested in officeindustrialretail, or multifamily properties, we can help.

Data source: Costar Analytics

Market Pulse: South Bay, November 2019

It’s been said that “numbers never lie.” So while we may feel like our day-to-day work keeps our finger on the pulse of the Northern California commercial real estate market, it’s always good to look at the numbers and see what’s real.

So every month we scour the data in each of the regions NAI Northern California covers and determine the health of our primary markets in office, retail, industrial and multifamily properties. We check four indicators in each asset class:

  1. Current Inventory
  2. Under Construction
  3. 12-Month Net Absorption
  4. Vacancy Rate

Here below is our November 2019 report for the South Bay, which we’ve also compiled into an eye-friendly infographic. Follow our blog, social media feeds, or subscribe to our newsletter for monthly updates to this data, and for our companion reports on San Francisco, the East Bay, and the North Bay.

The Data

Office Properties: This month, the South Bay office market’s inventory is slightly up from October at 131 million sq. ft. and expected to continue to rise. Approximately 6.8 million sq. ft. are under construction, way down from October, but this figure is trending upward. The 12-month net absorption rate is down to 2.7 million sq. ft. of office space, with an inconsistent pattern the last few months and projected to reverse again into an increase. The vacancy rate is at 8.6 percent, half a percent up from October and expected to drop.

Industrial Properties: For the industrial market, 197 million sq. ft. of space is in the inventory, the same as the last few months, but this figure is expected to increase any day now. The space under construction is also projected to rise, at 995,000 sq. ft. (way up from August, September, and October). The 12-month net absorption took a sharp dip, at 316,000 sq. ft., but is on an upward trajectory. The vacancy rate is slightly higher than in September and October, at 6.1%, but is expected to go back on the decline.

Retail Properties: There are 79.8 million sq. ft. of retail space available, barely up from last month. The space under construction is also marginally up over the last three months, at 1.2 million sq. ft., and is expected to increase despite the holiday season. The 12-month net absorption rate shot from -12,000 sq. ft. in October to 53,000 this month. Vacancy rates are just slightly down at 3.3% and projected to continue to decline.

Multifamily Properties: The multifamily market is holding strong at 146,000 units available in the inventory, slightly more than last month and the month before. Construction is at 9,500 units and expected to continue to increase. The 12-month net absorption rate is 2,600 units, marginally up from the last few months and projected to continue to rise. The vacancy rate is at 4.9%, slightly up from October, but is projected to decline.

The South Bay market stretches from Palo Alto down through Mountain View, San Jose, Morgan Hill, Gilroy, Hollister, and southeast through the mountains. For more detailed updates or to find out how the South Bay’s submarkets are doing, contact one of our advisors. Whether you’re interested in officeindustrialretail, or multifamily properties, we can help.

Data source: Costar Analytics

Market Pulse: East Bay, November 2019

It’s been said that “numbers never lie.” So while we may feel like our day-to-day work keeps our finger on the pulse of the Northern California commercial real estate market, it’s always good to look at the numbers and see what’s real.

So every month we scour the data in each of the regions NAI Northern California covers and determine the health of our primary markets in office, retail, industrial and multifamily properties. We check four indicators in each asset class:

  1. Current Inventory
  2. Under Construction
  3. 12-Month Net Absorption
  4. Vacancy Rate

Here below is our November 2019 report for the East Bay, which we’ve also compiled into an eye-friendly infographic. Follow our blog, social media feeds, or subscribe to our newsletter for monthly updates to this data, and for our companion reports on San Francisco, the North Bay, and the South Bay.

The Data

Office Properties: This month the East Bay office market’s inventory is slightly up, at 114 million sq. ft., with approximately 1.3 million sq. ft. under construction (up from October, but projected to decline as we enter the winter months). The 12-month net absorption rate is at 1.3 million sq. ft. of office space, continuing its rise over the last few months, and is expected to continue rising. The vacancy rate has continued its climb to 8.8 percent, but is expected to reverse directions in coming weeks.

Industrial Properties: For the industrial market, 267 million sq. ft. of space is in the inventory, slightly up from last month, and the figure is expected to continue to rise. The space under construction, 5.2 million sq. ft., has been slowly decreasing from September through October and is projected to continue to decline, as expected in the rainy season and with the holidays approaching. The 12-month net absorption rate continues to drop and is currently at -1.8 million sq. ft. of industrial space. The vacancy rate jumped from 4.9% to 5.4% for November. Both trends are projected to continue.

Retail Properties: There are 124 million sq. ft. of retail space available, which has been the same since August. The sq. ft. under construction is down to 257,000 sq. ft. and projected to decrease. The 12-month net absorption rate is at -393,000 sq. ft., up from October but expected to decline. Vacancy rates are slightly up from last month, at 3.7%, and are expected to continue to rise.

Multifamily Properties: The multifamily market is holding strong with 172,000 units available in the inventory, just 1,000 more than October. Construction is on a downswing, with 6,900 units in the pipeline, as expected for this time of year. The 12-month net absorption rate is 1,700 units, slightly down compared to the last two months. The vacancy rate is finally dropping, up to 4.3% this month, but projected to rise.

For more detailed updates or to find out how the East Bay’s submarkets are doing, contact one of our advisors. Whether you’re interested in officeindustrialretail, or multifamily properties, we can help.

Data source: Costar Analytics

NAI Northern California promotes Jonathan Burmenko to Investment Advisor

NAI Northern California, a member of the world’s premier managed network of commercial real estate firms, is pleased to announce the promotion of Jonathan Burmenko from Market Analyst to Investment Advisor. Jonathan is a newly licensed real estate salesperson in California. Since joining NAI Northern California, Jonathan has formed a specialty in Bay Area multifamily properties and joined the high-performing Grant Chappell team that puts the client’s needs first and forms strong, long-lasting relationships.

Before pursuing a career in commercial real estate, Jonathan worked as a personal trainer, where he gained valuable skills in leadership and catering to clients’ needs at the highest level. Jonathan has lived in the Bay Area for his whole life, being born in San Francisco and settling in Walnut Creek, solidifying a strong knowledge of the Bay.

NAI Northern California promotes Cole Byrd to Investment Advisor

NAI Northern California, a member of the world’s premier managed network of commercial real estate firms, is pleased to announce the promotion of Cole Byrd from Market Analyst to Investment Advisor. Cole is a member of the Berger Mandel Associates team, based in the San Francisco office and specializing in multifamily properties.

Cole began his career in the automotive industry working for Sonic Automotive and AW Collision Group. Prior, he graduated from the University of San Francisco with a bachelor’s degree in Entrepreneurship and Innovation. He was raised in Orlando, FL and Charlotte, NC before making the move to San Francisco, where he currently lives.

Market Pulse: San Francisco, November 2019

It’s been said that “numbers never lie.” So while we may feel like our day-to-day work keeps our finger on the pulse of the Northern California commercial real estate market, it’s always good to look at the numbers and see what’s real.

So every month we scour the data in each of the regions NAI Northern California covers and determine the health of our primary markets in office, retail, industrial and multifamily properties. We check four indicators in each asset class:

  1. Current Inventory
  2. Under Construction
  3. 12-Month Net Absorption
  4. Vacancy Rate

Here below is our November 2019 report for San Francisco, which we’ve also compiled into an eye-friendly infographic. Follow our blog, social media feeds, or subscribe to our newsletter for monthly updates to this data, and for our companion reports on the East Bay, North Bay, and South Bay.

The Data

Office Properties: This month, the San Francisco office market’s inventory is just slightly up from October, at 171 million sq. ft., with 6.3 million additional sq. ft. under construction. This figure is up about 300,000 sq. ft. from last month but is expected to decline. Twelve-month net absorption stands at 2.8 million sq. ft. of office space, which is down about 200,000 from last month. The vacancy rate is barely up this month, at 6.0%, but projected to decrease as the holidays bring limited movement.

Retail Properties: There are 82 million sq. ft. of retail space available in San Francisco, which is the same as the last few months. However, this figure is still expected to drop. More is coming, with about 704,000 sq. ft. under construction (slightly up from October), and the 12-month absorption rate is at at -190,000 sq. ft., which is much lower than in September or October’s positive numbers. Vacancy rates are slightly up from last month but are expected to decline, at 2.8%.

Industrial Properties: For the industrial market, 94.5 million sq. ft. of space is in the inventory, just up from last month, and this number is expected to continue to rise as the 2.4 million sq. ft. currently under construction wends its way towards completion. Construction is expected to increase, though likely slowly given recent trends and the approach of the rainy season. The 12-month net absorption rate is at -27,700 sq. ft., shockingly down compared to September and October’s positive numbers, and the vacancy rate is at 3.9% and holding steady.

Multifamily Properties: The multifamily market is very slightly down from last month, with up to 166,000 units available in the inventory. Construction is also slightly down from last month, at 6,762 units, but projected to increase despite the season. The 12-month net absorption rate continues to slowly decline, at 1,605 units for November. The vacancy rate is 4.7%, which is higher than the last two month, but is projected to drop.

For more detailed updates or to find out how San Francisco’s submarkets are doing, contact one of our advisors. Whether you’re interested in officeindustrialretail, or multifamily properties, we can help.

Data source: Costar Analytics

Yeah but what does a private Walgreen’s mean to *property* investors? 

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Word is out this week that Walgreen’s is exploring the possibility of going private. The now-public drugstore chain is working with investment bank Evercore Partners to gauge interest from large private equity firms in footing the roughly $55 billion bill. That would make it the largest leveraged buyout ever.

Walgreen’s has a history of valuing its business privacy — particularly with regards to its prescription sales numbers — and for being at odds with Wall Street scrutiny. The market has battered them this year, pushing stock down 28% in the past 12 months. This move is thought to be prompted by management’s vision to be more autonomous with their strategies and partnerships.

Last week in this newsletter we pondered some numbers around the “retail apocolypse,” and discovered that the Amazon Effect isn’t so much killing brick-n-mortar stores, it’s just reshaping the live retail offering. Walgreen’s is a prime example of this, and while they’ve taken an  Amazon hit, they’re re-aligning in a way that is taking their physical stores in a positive direction.

Walgreen’s has pilot projects and tests with companies like the grocer Kroger, Microsoft, and primary care providers like Humana’s Partners in Primary Care and VillageMD, a developer of primary care clinics. This makes them less reliant on “Amazonable” products like shampoo, while creating revenue from real-time, location-centric services.

And they’ve announced plans to close 200 stores in this streamlining effort, which can sound ominous to property owners leasing to the chain. But these stores are all clearly declining and unprofitable locations, and removing that dead weight actually makes their other locations more valuable.

The conclusion here is that this news makes the investment market for Walgreens properties hotter than usual — Walgreens stock has jumped 6% on the news.

Under our NAI roof here, our overall highest-producing broker over the last several years also happens to specifically be a Walgreen’s expert. Senior VP Mary Alam, working with Investment Advisor CJ Brill, generally covers our retail channels here at NAI NorCal. And within that work, several transactions for both buyers and sellers of Walgreen’s-leased properties have crossed their desks.

The team very recently closed a deal here in the SF Bay Area, as well as representing locations in California’s Central Valley, Sacramento and South Carolina. And they have multiple off-market Walgreen’s options right now. And if you’re looking nationwide, we’ve also got Managing Director Joby Tapia representing a Walgreen’s property in Atlanta, in contract with contingencies removed.

ALL of these properties are the kind of high-traffic, high-performing, market-leading locations that Walgreen’s invests more into while they trim elsewhere. So contact us today if you’re interested in moving on this news while the ink is still wet…