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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

How would San Francisco’s proposed fees on empty storefronts affect retail and mixed-use properties?

This week the San Francisco Board of Supervisors will vote on whether to require owners of vacant storefronts unoccupied for more than 30 days to register their properties and pay an annual fee. This is one of the proposals they are considering to get a better idea of and start to remedy the glut of unused storefront space around the city.

Read more on Curbed San Francisco

In 2069, your food will shop for you

Industry experts place their bets on the supermarket of the future.

The trouble with predictions about the future of food is that they usually wind up being wrong. Where, for instance, is the dog-sized cow engineered to graze in my backyard? Meals today don’t come in pill form, and despite decades of anticipation, insects haven’t replaced farm animals as a meaningful source of protein. You’ll understand why I’ve approached the question of how we’ll shop for food in the year 2069 with some amount of hesitancy.

To find my footing, I called Max Elder at the Institute for the Future, a think tank based in Palo Alto, California. Elder works as a researcher in the Food Futures Lab, which companies and governments hire to do exactly the type of blue-sky thinking that conjures up an idea like that backyard cow—or, in this particular case, blenders and refrigerators that can conspire to manipulate commodity markets. Whether or not these concepts bear out, Elder tells me, he believes that engaging in such speculation is critical to shaping our world. Fail to dream about the future, and you forfeit your role in its creation.

Today, the grocery store is in a period of particularly rapid change, as more and more companies vie for their share of America’s $650 billion food retail sector. Legacy supermarket chains like Kroger and Albertsons are now up against discount rivals like Walmart and Costco, European transplants Aldi and Lidl, plus drugstores, dollar stores, and, of course Amazon, which has been steadily encroaching on food retail since its 2017 acquisition of Whole Foods. All that competition has produced a climate of innovation, as retailers try to best each other on exclusive products and services, value, technology, and convenience. The choices they make matter: Everybody eats, after all, and what we consume is determined to a large extent by what our grocery stores decide to offer.

In forecasting where the industry will go over the next few decades, Elder told me, “The idea is to push people beyond notions of what’s plausible to what’s possible. What are the values implicit in the question? What will the food system look like if we optimize for different values?” He encouraged me to think of it all not so much as predictions but imaginings. So, I decided to suspend disbelief, loosen my grip on reality, and imagine a world where T-bone steaks grow on trees (or at least in bioreactors), snacks are tailored to my microbiome, and my morning coffee arrives by drone. Saddle up, everyone! Don’t forget your decoder rings.

Read more at Medium

 

 

The shopping mall’s savior is starting to eat itself

Restaurants, one of the supposed saviors of regional malls, have been hurt in the past 12 months by too much expansion and a slowdown in consumer spending.

Stephen Wall’s restaurant chain Pho is the kind of tenant that mall landlords would love to attract. The Vietnamese menu is right on trend, the business is expanding and, even better, it has a track record of success in shopping centers.

Yet he thinks that even restaurants like his won’t be the savior of malls suffering from the rise of internet retailing and mobile phone addiction.

As competition from the likes of Amazon.com Inc. and Asos Plc intensified, British mall owners looked to food as a way to stay relevant. People would come to the restaurants to eat, buy some clothes in the shops while there, and the extra spending would allow the landlord to boost the rents. A simple, virtuous circle.

Instead, food and beverage operators have been hurt over the past 12 months by a combination of rapid expansion and a consumer-spending slowdown. An influx of private-equity investment into restaurants led some chains to open too many outlets that aren’t breaking even. Popular names like Gourmet Burger Kitchen, pasta place Carluccio’s and the Jamie Oliver chain — often found at big malls like Westfield and Bluewater around London or Manchester’s Trafford Centre — have been among those suffering. Nationwide, the number of restaurants going insolvent rose 24 percent last year, compared with 2017.

 

 

Read more on National Real Estate Investor

 

 

 

How low-cost chains are changing the retail game

Dollar store chains are among America’s fastest-growing retailers, but their impact on the industry is coming under increased scrutiny.

Nonprofit Institute for Local Self-Reliance reports that dollar stores are more prevalent than Walmart and McDonalds locations combined, and they feed more people than Whole Foods stores. In some urban neighborhoods, low-income and rural areas, dollar stores might be one of the only retail options for residents.

The number of dollar stores in America has grown from 20,000 in 2011 to almost 30,000, per ILSR. With many Americans living paycheck to paycheck, it’s not surprising these small-box stores selling affordable merchandise are thriving.

The ILSR report contends that dollar stores — which lack fresh produce and meat but offer a host of frozen, processed and canned food options — aren’t a symptom of economic distress in some communities, but the cause of it, as they stifle independent grocers and other local retailers.

“To the extent that dollar stores are filling, in some ways, a need in communities, I think that is true in the short term,” Marie Donahue, one of the report’s authors, told Civil Eats. “But really our research is demonstrating…those foods aren’t as good quality as full-service grocers or independent local stores, which may be able to connect to local farmers and the larger food system.”

 

 

Read more on San Francisco Business Times

 

 

Are food halls a magic elixir for retail owners?

The concept of the food hall has taken deep root in U.S. retail properties, with scores up and running and hundreds in the pipeline.

Though a popular addition for struggling retail properties, celebrity chef Todd English said that without the right approach, food halls are not always the solution for owners. English spoke at the recent Second Annual International Council of Shopping Centers-Baruch College Real Estate Conference, as reported by Real Estate Weekly.

He warned that some food halls are merely “glorified food courts with better options.” He further called food halls a WeWork model, a kind of coworking space that “has to be about more than just food.”

Food halls are a draw because of their perceived authenticity, as local eateries, healthier options and craft breweries edge out standard food court fare (fast food, that is).

While not every food hall is going to feature chef-curated or otherwise expensive options, they have to be creative in some way, English said during the ICSC conference. “It’s not just another great turkey sandwich or croissant, or whatever the latest trend is, it’s something that brings people in.”

For retailers, a successful food hall is thus not a matter of simply setting up a food hall. With the increasing number of food halls, they too need to stand out to be competitive.

 

 

Read more on Bisnow

 

Sneak peek: Office Depot debuts co-working space in Los Gatos store

Office Depot is piloting its first-ever co-working space inside a retail store at its Los Gatos location.

The move comes as the office supplies retailer looks to edge in on co-working giants like WeWork by offering workspace for freelancers, small business owners and remote workers.

The space inside the store at 15166 Los Gatos Blvd. is called Workonomy Hub.

Much like WeWork, Workonomy offers options ranging from renting a desk in a common area ($40 per day) to private offices ($750 per month). The space also includes high-speed Internet, free refreshments, business services like printing, shipping and mail and package handling, and, of course “easy access to office supplies.”

“The combination of Office Depot’s current suite of products and services with a physical co-working space creates a comprehensive offering for small business owners, entrepreneurs and remote employees under one roof,” the company said in a statement.

Read more on San Francisco Business Times