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Market Pulse: North Bay, July 2019

Welcome to NAI Northern California’s “Market Pulse” feature. We checked the pulse of the South 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, 12-month net absorption, under construction, and vacancy rate.

Check out our July 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 40.7 million sq. ft. and rising, with 12-month net absorption also up at 325,000 sq. ft. of office space. Approximately 17.2 million sq. ft. are under construction with a downward trend. The vacancy rate is at 6.8 percent and dropping.

For the industrial market, 105 million sq. ft. of space is in the inventory, with more on the way. The 12-month net absorption is heading up, at 164,000 sq. ft., and the space under construction is also rising, at 1 million square feet. The vacancy rate is at 4% and trending upward.

There are 65.7 million sq. ft. of retail space available and rising, with a 12-month net absorption rate nearly neutral at -4,600 sq. ft. (a decreasing trend). Less is being built, though, with 61,000  sq. ft. under construction. Vacancy rates continue to rise, at 3.7%.

The multifamily market is up to 59,000 units available in the inventory. The 12-month net absorption rate averages just 24.2 units across the North Bay area, but is rising. Construction is on the upswing here, at 987 units, with a rising vacancy rate of 3.8%.

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 office, industrial, retail, or multifamily properties, we can help.

Market Pulse: South Bay, July 2019

Welcome to NAI Northern California’s “Market Pulse” feature. We checked the pulse of the South 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, 12-month net absorption, under construction, and vacancy rate.

Check out our July 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 to 129 million sq. ft., with 12-month net absorption also up at 1.6 million sq. ft. of office space. Approximately 6.4 million sq. ft. are under construction with an upward trend. The vacancy rate is at 8.6 percent and dropping.

For the industrial market, 198 million sq. ft. of space is in the inventory and rising. The 12-month net absorption is on its way up, at 1.1 million sq. ft., and the space under construction is dropping, at 710,000 square feet. The vacancy rate is at 5.6% and trending downward.

There are 80.1 million sq. ft. of retail space available, with a 12-month net absorption rate of 169,000 sq. ft. (a decreasing trend). Less is being built, though, with 1 million sq. ft. under construction. Vacancy rates continue to drop, at 3.4%.

The multifamily market is holding strong, up to 144,000 units available in the inventory. The 12-month net absorption rate is 2,100 units and rising. Construction is on the downswing here, at 10,00 units, with a rising vacancy rate of 4.7%.

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 office, industrial, retail, or multifamily properties, we can help.

Market Pulse: East Bay, July 2019

Welcome to 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, 12-month net absorption, under construction, and vacancy rate.

Check out our July 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 up to 112 million sq. ft., with 12-month net absorption also up at 134,000 sq. ft. of office space. Approximately 1.7 million sq. ft. are under construction with a downward trend. The vacancy rate is rising, at 8.7 percent.

For the industrial market, 265 million sq. ft. of space is in the inventory and rising. The 12-month net absorption is almost even, dropping to -1,300 square feet. The space under construction is also dropping, at 5.3 million square feet, and the vacancy rate is rising to 5%.

There are 124 million sq. ft. of retail space available, and more coming, with a 12-month net absorption rate of 5,000 sq. ft. (an increasing trend). Less is being built, though, with only 345,000 sq. ft. under construction. Vacancy rates continue to rise, at 3.5%.

The multifamily market is holding strong, up to 16,900 units available in the inventory. The 12-month net absorption rate is 1,300 units. Construction is on the downswing here, at 9,800 units, with a rising vacancy rate of 4.6%.

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 office, industrial, retail, or multifamily properties, we can help.

Market Pulse: San Francisco, July 2019

Welcome to the first edition of NAI Northern California’s newest 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, 12-month net absorption, under construction, and vacancy rate.

Check out our July 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 up to 175 million sq. ft., with 12-month net absorption down at 2 million sq. ft. of office space. Approximately 6.9 million sq. ft. are under construction with an upward trend. The vacancy rate is rising, at 6.3 percent.

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 office, industrial, retail, or multifamily properties, we can help.

Foreign investment rising for net lease assets

Foreign investment in commercial real estate is on the rise due to the search for yield and portfolio diversification, according to the World Property Journal. Globally, investment in net lease properties (office, retail, and industrial) averaged $3 billion per year from 2011 to 2014 and is up to more than $8 billion per year from 2015 to 2019. In the United States, foreign investments for Q1 2019 represented 15.1% of net lease transactions, totaling $1.9 billion, up 6.6% compared to Q1 last year when they only represented 12.9% of the market. In 2018, foreign investors held 30.1% more net lease properties than in 2017, an $8.8 billion increase.

Most of these investors are from Canada, South Korea, and China. Canadians invested $5.55 billion, with a focus on industrial properties; South Koreans invested $3.28 billion, overwhelmingly preferring office space; and Chinese investments of $3.22 billion also focused on industrial assets.

So far this year, New York City, San Francisco, Boston, Dallas, Columbus, and Los Angeles have received the most foreign capital, but commercial real estate investments in high-growth secondary and tertiary markets like Phoenix, Seattle, Baltimore, and Atlanta are also becoming popular.

Source: World Property Journal

San Jose and Oakland challenge SF in private equity real estate market

California’s largest cities for real estate investment, San Francisco and Los Angeles, are now being challenged by San Jose and Oakland. California holds almost 20% of the private equity real estate (PERE) in the country and 12% of global PERE assets under management, according to a study by accounting and advisory firm EisnerAmper and Preqin. PERE properties include office buildings (high-rise, urban, suburban and garden offices); industrial properties (warehouse, research and development, flexible office/industrial space); retail properties, shopping centers (neighborhood, community, and power centers); and multifamily apartments (garden and high-rise). Less common but still an option are senior or student housing, hotels, self-storage, medical offices, single-family housing to own or rent, undeveloped land, and manufacturing space (via Investopedia). 

So how do the Bay Area cities compare?

San Francisco’s strength is in its office market, with $3.2 billion PERE deals in 2018 (a $1 billion increase over 2017) and another $1 billion already invested this year as the Bay Area’s largest tech companies continue to expand. The overall PERE total for last year was $4 billion,down from $4.8 billion in 2017; according to an article in the San Francisco Business times, “the drop-off in the quantity of large mixed-use transactions compared with recent years is at the heart of the decrease.” San Francisco is also running out of space, which limits growth.

While San Francisco is still the largest market for office transactions in the Bay Area, San Jose is leading in growth. Their office transactions in 2017 and 2018 both reached $1 billion, with a record in 2018 at $1.2 billion. In Q1 of 2019 alone, these transactions reached $500 million, putting San Jose on track to quadruple its PERE deals this year. The overall PERE total for 2018 was another record of $2.7 billion, almost 60% more than 2017 and a sharp contrast to San Francisco. 

Oakland may be emerging as a competitor, with more reasonable housing options for tenants; the tech company Square announced at the end of last year their intent to move 2,000 employees into an Oakland office. Even as a smaller city, it is on track to reach a total of $1 billion in PERE deals this year, with $560 million in Q1 2019 already; $493 million of that was just two office space deals by Starwood Capital Group. The city also has more Opportunity Zones than either of the other two cities.

With San Francisco as the “benchmark,” San Jose as the “growth leader,” and Oakland as the “up and comer” (according to the SF Business Times), all three cities are going strong.

Source: SF Business Times

 

A sample of SF waterfront redevelopment concepts

The Port of San Francisco’s “request for interest” for 14 waterfront structures within the Embarcadero Historic District is an outgrowth of a larger effort to update the port’s Waterfront Land Use Plan.

That effort began in 2015 and should move to environmental studies next year. The goal for the requests is to try and begin making plans to revive specific piers, so work could begin soon after an update is approved.

Respondents include restaurateurs seeking space, cultural entrepreneurs, and developers or design firms eager to take part in future projects. The full set of 52 responses can be found at www.sfport.com, but here are six examples that show the range of ideas.

 

Read more on the San Francisco Chronicle

 

 

Oakland to vote on property tax, owner move-in eviction measures

Oakland voters in November will be deciding on three new measures.

The three new measures include a tax on vacant properties, increase the real estate transfer tax rate for properties worth more than $2 million and disallow landlords from evicting tenants on the grounds that the landlord lives in the property.

The vacant property tax, which must pass by a two-thirds majority, would impose a special parcel tax on all vacant property — including lots, industrial and commercial buildings, and units in apartment buildings and other multi-unit buildings like condo or townhouse complexes.

The measure was passed during Tuesday’s marathon city council meeting which lasted into the early morning hours of Wednesday. Landlords spoke out against the measures, mostly claiming they would put an unfair burden on small “mom-and-pop” landlords who may only have one rental property and rely on that income. Tenants’ rights activists supported the measures, and shared stories of landlords treating tenants unfairly, as well as the need for housing.

 

 

Read more on East Bay Times

 

 

 

After two projects sank, can San Francisco find developers for decaying waterfront?

The new effort is one of the largest but also potentially costliest redevelopment opportunities in the city.

The Port of San Francisco is seeking ideas for new uses at 13 historic waterfront piers, in one of the largest but also potentially one of the costliest redevelopment opportunities in the city.

The agency wants proposals from both large developers and smaller tenants such as nonprofits, arts groups and retailers to revive the piers, which are now vacant or used for parking or storage.

Some previously renovated piers have been financial successes. Waterfront offices at the Ferry Building and Piers 1 1/2, 3 and 5 have signed tenants for rents over $100 per square foot. Control of the Piers later sold for $103 million in 2016, and the Ferry Building is expected to be sold to Hudson Pacific Properties for around $300 million, according to sources tracking the market.

But two recent redevelopment efforts failed because of the high costs of rehabilitating and seismically protecting piers. A study for the Port found that $74 million to $10 million would be required to bring a single pier up to code. Last year TMG Partners and Premier Structures, Inc. exited an office, event and restaurant space proposal at Pier 38 after the cost to repair the pier was expected to be as high as $122 million.

 

 

 

Read more on San Francisco Business Times

 

 

 

Another 500 apartments on tap amid tiny East Bay city’s housing boom

Emeryville’s former Sherwin-Williams paint factory could begin its transformation into 500 new apartments early next year. 

After a five-year development process, the city approved Lennar Multifamily Communities project in February.

Lennar is expected to file for building permits early next year, said Charles Bryant, Emeryville’s planning and building director. The first homes could be completed by the end of 2021. Lennar didn’t respond to requests for comment.

Despite its tiny 1.28-square-mile size, Emeryville is seeing a number of large multifamily projects as industrial sites give way to mixed-use development. Sherwin-Williams would be the largest.

 

Read more on San Francisco Business Times