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

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… 

 

Market Pulse: North Bay, October 2019

Welcome to the NAI Northern California’s “Market Pulse” feature. We checked the pulse of the North Bay commercial real estate market to discover the ups and downs of the office, industrial, retail, and multifamily markets. Each market has four dimensions: current inventory, under construction, 12-month net absorption, and vacancy rate.

Check out our October 2019 North Bay Market Pulse infographic. If a dimension is on the rise, the pulse goes above the baseline; if it’s on the decline or negative, the pulse will dip below the baseline.

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, slightly up from last month but projected to decline. The 12-month net absorption rate is way down, at -21,000 sq. ft. compared to September’s 56,000 square feet. The vacancy rate is at 8.3 percent and expected to hold there.

For the industrial market, 106 million sq. ft. of space is in the inventory, the same as last month but expected to increase. The space under construction is also rising, at 2.3 million sq. ft. of industrial space. The 12-month net absorption is at 222,000 sq. ft., and the vacancy rate is at 4..1% and declining.

There are 65.8 million sq. ft. of retail space available, slightly more than last month and projected to increase. The sq. ft. under construction is at 94,000 sq. ft., up from September’s 72,000 sq. ft., but on a downward trend. The 12-month net absorption rate continues to plunge, now negative 42,000 square feet. Vacancy rates are up slightly from last month, at 3.6%, and are expected to continue to rise.

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 last month). The 12-month net absorption rate averages just 28 units across the North Bay area and is expected to rise, with a steadily rising vacancy rate of 5.5 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, October 2019

Welcome to the NAI Northern California’s “Market Pulse” feature. We checked the pulse of the South Bay commercial real estate market to discover the ups and downs of the office, industrial, retail, and multifamily markets. Each market has four dimensions: current inventory, under construction, 12-month net absorption, and vacancy rate.

Check out our October 2019 South Bay Market Pulse infographic. If a dimension is on the rise, the pulse goes above the baseline; if it’s on the decline or negative, the pulse will dip below the baseline.

This month, the South Bay office market’s inventory is holding steady at 130 million sq. ft. but is expected to rise. Approximately 5.5 million sq. ft. are under construction, slightly down from September, but this figure is trending upward. The 12-month net absorption rate is up to 3.3 million sq. ft. of office space, an increase over last month. The vacancy rate is at 8.1 percent and is continuing to drop.

For the industrial market, 197 million sq. ft. of space is in the inventory, the same as last month, but this figure is expected to increase. The space under construction is also projected to rise, at 771,000 sq. ft. (the same as September and August). The 12-month net absorption is down from last month, at 884,000 sq. ft., but on an upward projection. The vacancy rate is slightly higher than September’s, at 5.8%, and is expected to go back on the decline.

There are 79.7 million sq. ft. of retail space available, a slowly decreasing trend. The space under construction has been the same for the last two months, at 1 million sq. ft., but is expected to decline. The 12-month net absorption rate is continuing to drop, currently -12,000 square feet. Vacancy rates are holding steady at 3.4%, but a drop is projected for November.

The multifamily market is holding strong at 145,000 units available in the inventory, slightly more than last month. Construction is at 9,000 units but is expected to increase. The 12-month net absorption rate is 2,800 units and has been rising steadily over the last few months. The vacancy rate is at 4.8%, up almost half a percent from last month, 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, October 2019

Welcome to the NAI Northern California’s “Market Pulse” feature. We checked the pulse of the East Bay commercial real estate market to discover the ups and downs of the office, industrial, retail, and multifamily markets. Each market has four dimensions: current inventory, under construction, 12-month net absorption, and vacancy rate.

Check out our October 2019 East Bay Market Pulse infographic. If a dimension is on the rise, the pulse goes above the baseline; if it’s on the decline or negative, the pulse will dip below the baseline.

This month the East Bay office market’s inventory is holding steady at 113 million sq. ft. with approximately 1 million sq. ft. under construction (slightly less than in September). The 12-month net absorption rate is at 1.1 million sq. ft. of office space, a minor increase from last month, and is expected to continue rising. The vacancy rate is higher than last month, but is expected to drop, at 8.6 percent.

For the industrial market, 266 million sq. ft. of space is in the inventory, the same as last month, but this figure is expected to rise. The space under construction, 5.3 million sq. ft., is down from last month and projected to continue to decline. The 12-month net absorption rate continues to drop and is currently at -1.2 million sq. ft. of industrial space. The vacancy rate is slowly increasing at 4.9 percent.

There are 124 million sq. ft. of retail space available, which is the same as August and September, but this is expected to increase, with 333,000 sq. ft. under construction. This is also the same as September, with a decrease expected. The 12-month net absorption rate is at -421,000 square feet. Vacancy rates are slightly down from last month, at 3.6%, but are expected to rise.

The multifamily market is holding strong with 171,000 units available in the inventory. Construction is up from last month, but is expected to go on a downswing, with 10,000 units in the pipeline. The 12-month net absorption rate is 2,000 units and has been the same for the last two months. The vacancy rate is steadily rising, up to 4.9% this month.

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.

Market Pulse: San Francisco, October 2019

Welcome to the NAI Northern California’s “Market Pulse” feature. We checked the pulse of the San Francisco commercial real estate market to discover the ups and downs of the office, industrial, retail, and multifamily markets.  Each market has four dimensions: current inventory, under construction, 12-month net absorption, and vacancy rate.

Check out our October 2019 San Francisco Market Pulse infographic. If a dimension is on the rise, the pulse goes above the baseline; if it’s on the decline or negative, the pulse will dip below the baseline.

This month, the San Francisco office market’s inventory is still at 176 million sq. ft., with 6 million additional sq. ft. under construction. This figure is up significantly from last month but is expected to decline. Twelve-month net absorption stands at 3.1 million sq. ft. of office space, which is also way up from last month. The vacancy rate is finally on the decline, standing at 5.9%.

For the industrial market, 95 million sq. ft. of space is in the inventory (the same as last month), but this number is expected to rise as the 1 million sq. ft. of industrial space under construction begins to reach completion. The amount of space under construction is expected to continue to rise as well, though it’s down slightly from last month. The 12-month net absorption rate is at 109,000 sq. ft., way down from September, and the vacancy rate is at 3.9% (also trending upward).

There are 82 million sq. ft. of retail space available in San Francisco, which is the same as last month. However, this figure is expected to drop. More is coming, with about 654,000 sq. ft. under construction (the same as last month), and the 12-month absorption rate is at 53,000 sq. ft., which is much lower than in September. Vacancy rates are up from last month but are expected to decline, at 2.7%.

The multifamily market is slowly growing, with up to 167,000 units available in the inventory. Construction is on the upswing here, both from last month and in future projections, at 6,900 units. The 12-month net absorption rate is down slightly at 1,700 units. The vacancy rate is 4.3%, which is higher than last 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.

Homes are Finally Getting More Affordable; Will Apartment Downside Risk Follow?

Housing price growth has moderated and mortgage rates have declined, leading to increased housing affordability at the same time as rising consumer confidence and incomes have prompted developers to start building more quickly. What will this mean for the apartment rental market?

According to CoStar Analytics, both existing and new home sales rose in August, with new single-family home sales increasing all summer and existing home sales increasing two months in a row. And single-family housing starts increased in August for the third month in a row despite continually rising costs, delays, and lot scarcity. This has resulted in the lowest home price growth since 2012, below 4% per year. Mortgages are getting cheaper as well due to monetary policy and 10-year Treasury yield changes; CoStar reports “NAR’s housing affordability index based on fixed rate mortgages was up more than 10% in July compared to a year ago.”

However, homeownership rates have not yet increased; overall, they continued to decline over the first half of the year. But as new data becomes available for the second half of the year, multifamily investors are advised to proceed with caution.

Source: CoStar Analytics

Market Pulse: North Bay, September 2019

Welcome to the NAI Northern California’s “Market Pulse” feature. We checked the pulse of the North Bay commercial real estate market to discover the ups and downs of the office, industrial, retail, and multifamily markets. Each market has four dimensions: current inventory, under construction, 12-month net absorption, and vacancy rate.

Check out our September 2019 North Bay Market Pulse infographic. If a dimension is on the rise, the pulse goes above the baseline; if it’s on the decline or negative, the pulse will dip below the baseline.

This month the North Bay office market’s inventory is at 40.8 million sq. ft., slightly up from last month but holding flat, with approximately 147,000 sq. ft. under construction. This is way down from last month’s 17.2 million sq. ft. of office space. The 12-month net absorption rate is also down, at 56,000 square feet. The vacancy rate is at 7.8 percent and expected to hold there.

For the industrial market, 106 million sq. ft. of space is in the inventory, with more on the way, and the space under construction is also rising, at 2.1 million sq. ft., over a million more than last month. The 12-month net absorption is at 206,000 sq. ft., and the vacancy rate is at 3.9% and declining.

There are 65.6 million sq. ft. of retail space available, the same as last month, and the sq. ft. under construction also hasn’t changed at 72,000 sq. ft. but on a downward trend. The 12-month net absorption rate is way down at 22,000 square feet. Vacancy rates are down slightly from last month, at 3.5%, but expected to rise.

The multifamily market is up to 60,000 units available in the inventory. Construction is on the downswing here, at 542 units. The 12-month net absorption rate averages just 63 units across the North Bay area and is on the rise, with a rising vacancy rate of 5.2%.

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, September 2019

Welcome to the NAI Northern California’s “Market Pulse” feature. We checked the pulse of the South Bay commercial real estate market to discover the ups and downs of the office, industrial, retail, and multifamily markets. Each market has four dimensions: current inventory, under construction, 12-month net absorption, and vacancy rate.

Check out our September 2019 South Bay Market Pulse infographic. If a dimension is on the rise, the pulse goes above the baseline; if it’s on the decline or negative, the pulse will dip below the baseline.

This month the South Bay office market’s inventory is up 1 million sq. ft. from last month to 130 million sq. ft. and continues to rise. Approximately 5.6 million sq. ft. are under construction, slightly down from August but trending upward. The 12-month net absorption rate is the same as last month at 2.7 million sq. ft. of office space. The vacancy rate is at 8.4 percent and dropping.

For the industrial market, 197 million sq. ft. of space is in the inventory and rising. The space under construction is also rising, at 771,000 sq. ft. (the same as last month). The 12-month net absorption is way up from August, at 1 million sq. ft., formerly 844,000 square feet. The vacancy rate hasn’t changed, at 5.7%, but is trending downward.

There are 79.8 million sq. ft. of retail space available and dropping. The space under construction is the same as last month, at 1 million sq. ft., but expected to decline. The 12-month net absorption rate last month was 78,000 sq. ft. and has dropped dramatically to -7,000 square feet. Vacancy rates are slightly up from last month, at 3.4%, but trending downward.

The multifamily market is holding strong at 144,000 units available in the inventory, the same as last month. Construction is way up from last month, from 1,000 units to 9,700 units. The 12-month net absorption rate is 2,600 units and rising steadily.  The vacancy rate is at 4.3%, no change from last month, but expected to drop.

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