Multifamily
In the last months of 2024, the East Bay is seeing higher absorption and falling rents as the market adjusts to the elevated levels of new supply delivered over the past five years. Like the national trend, multifamily absorption accelerated through the first three quarters of 2024.
Vacancy
In the first three quarters of 2024, the East Bay multifamily market saw the highest absorption level since 2021. Like the overall national market, the growth in absorption is primarily a result of a large increase in new competitive supply, which has caused owners to hold off on rent increases and, in many cases, reduce rents to drive occupancy.
The East Bay market is a little ahead of the national market in the cycle. The delivery pipeline and vacancy rate peaked in the East Bay in 2022. Since then, vacancy has steadily decreased as the new product has been absorbed. In contrast, the national market, largely driven by extensive new construction across the Sunbelt, has seen peak deliveries in 2024. While absorption has started to climb, the national vacancy rate continues to increase.
Construction
Construction activity in the East Bay has slowed since the peak of 2020, when around 10,000 units were underway. Today, 3,200 units are under construction, increasing the market’s inventory by 1.7% and pushing it to almost 200,000 units.
Total deliveries for 2024 are projected to be around 2,100 units. This is 400 units less than in 2023 and will be the lowest annual total since 2018. Projections for 2025 show deliveries falling to around 1,200 units.
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Office
The East Bay office market is struggling to adapt to the new realities of the office market. The market has been looking for new footing since the shock of 2020. Tenants looked to the region to grow near San Francisco at a lower cost. As occupier demand dried up across the bay, excess space in the East Bay was no longer needed, and the market’s tech, professional services, and life sciences have all given back large blocks of new space.
Leasing
Market vacancy in the East Bay, currently 15.4%, the highest point in more than 25 years. Sourcing tenants has become extremely difficult, and net absorption has fallen to -2.3 million SF, with negative activity concentrated in 4 & 5 Star properties.
Sublease availability rests at 2.7%, slightly ahead of the national figure of 2.2%. Most of the space currently hitting the market is direct, as the sublease is comparable to levels in early 2021. More than forty buildings are on the market, and at least 100,000 SF is available. The large blocks of space are a result of the large tenants that had previously occupied the market, a downside of the market’s reliance on the tech sector for occupancy, and the 800,000 SF added to the market over the past five years.
Construction
As expected, there is no active construction. The most recent project to complete was the Fremont Bank building, a 35,000 SF 4-Star property delivered at the end of 2024. Upon completion, the building was fully occupied and did not impact the market’s vacancy or availability rates.
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Industrial
Supply has outpaced demand for the past five quarters, increasing the vacancy rate by almost 300 basis points. Negative net absorption in four of the past five quarters has further complicated the space market. Market participants point toward numerous tenant requirements that lack urgency with more available options in the market.
Leasing
The East Bay struggled to maintain its tenant base in 2024, posting negative net absorption in two of the three quarters. Over the past 12 months, demand fell to -4.5 million SF, with significant negative totals in both flex and logistics space of -1.0 million and -3.3 million SF, respectively. Moveouts were concentrated in the market’s older inventory. Of the new vacancies in the past year, the buildings were an average of 31 years old. Older inventory typically does not meet the clear height and loading standards many large logistics and distribution firms require.
Construction
The East Bay has a total of 2.9 million SF under construction, equating to a 1.0% increase in market inventory. More than 60% of that inventory is scheduled to deliver vacant, putting some upward pressure on the vacancy rate. Total under-construction inventory has decreased since 22Q3 when 6.7 million SF was underway. As active projects deliver, fewer new ones are breaking ground. Construction starts failed to reach 1 million SF in 2023, the lowest total since 2012 and only 700,000 SF has broken ground in 2024.
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Retail
The East Bay retail market has struggled to absorb the impact of the loss of population and employment, and retail fundamentals reflect a lack of confidence in a quick turnaround. Demand for retail space decreased by-340,000 SF over the past year, posting negative demand during 24Q1 and 24Q2 after positive metrics in four of the previous five periods.
Retail demand has yet to recover from the population exodus between 2020 to 2023. However, a diverse array of users are interested, specifically tenants in the off-price goods, fitness, grocery, and experiential sectors. Availabilities are tightest in small freestanding properties and grocery anchored neighborhood centers
Leasing
The East Bay’s retail market recorded negative demand after a strong 2023. Availability remains elevated at 5.8%. Poor demand runs counter to national trends, which saw increased consumer spending and improved retail margins. Over the past year, net absorption reached -340,000 SF and the availability rate has held at 5.8%.
Tenant demand has been uneven, and certain pockets have outperformed others. Two submarkets have all topped 100,000 SF in demand throughout the year: Hayward/Castro Valley and Newark Downtown Oakland are the only locals to surpass that figure. Historically strong performers like Dublin, Pleasanton, and Livermore have struggled to keep pace, posting negative net absorption totals over the past year.
Construction
The market has started to expand as 150,000 SF has come to market over the past year. Recent deliveries are primarily small, build-to-suit properties. Eight buildings completed in 2024, none of which reached 6,000 SF, except for a 162,000 SF new Costco at 350 Newpark Mall in Newark.
Geographically, the 320,000 SF currently under construction is distributed throughout the suburbs, with the most prominent projects located in San Ramon and Newark. Plaza Gale Ranch Phase IV is the largest project underway, a 125,000-SF neighborhood center in the San Ramon Submarket scheduled to complete in 24Q4. Toll Brothers, out of Milpitas, California, is developing the property adjacent to senior apartments with plans for a grocery anchor. Both projects will deliver 100% occupied. New construction poses little risk to the East Bay’s availability, as new developments will add 0.3% to market inventory, 95% of which will deliver occupied.
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*Source: CoStar
