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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

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.

Can San Francisco Break in to the Top Category of World Cities for CRE Investment?

According to a new system of ranking by JLL and The Business of Cities, an intelligence and strategy firm, San Francisco is the top contender for breaking into the highest level of Established World Cities for commercial real estate investment. At the top are the Big Seven, which “account for nearly one-quarter of all capital invested in commercial real estate globally” and are comprised of London, New York, Paris, Singapore, Tokyo, Seoul, and Hong Kong. San Francisco is number eight on the ranking of 46 indices and 7 categories that cover corporate presence; global flows; scale and market size; infrastructure platform; talent; innovation; and soft power.

“Global cities that adapt to new economic models focusing on quality of life, innovation, sustainability, governance and resilience are becoming new sources of real estate demand and attracting higher cross-border investment,” says an article about the report by Multi-Housing News.

The Contenders, the second-strongest category after the Big Seven and the one San Francisco tops, have shown the fastest growth in real estate investment over the last cycle and the strongest rental office growth since 2000.

Silicon Valley also shows up on the rankings list as a New World City in the Innovator category; this group has seen investment volumes grow by 50 percent since 2006 and ranks just behind the Big Seven for real estate investment intensity. San Francisco’s Contenders category is number four on that list, behind the Lifestyle cities. The remaining categories are Influencers, Megahubs, Enterprisers, Powerhouses, Hybrids, and National Growth Engines.

Sources: Multi-Housing News, Commercial Property Executive

 

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

Market Pulse: San Francisco, September 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 September 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 1.8 million additional sq. ft. under construction and dropping. Twelve-month net absorption stands at 1.8 million sq. ft. of office space and rising, yet the vacancy rate also continues to rise, at 6.3 percent.

For the industrial market, 95 million sq. ft. of space is in the inventory (the same as last month), but the number is expected to rise as the 2.8 million sq. ft. of industrial space under construction begins completion. The amount of space under construction is expected to continue to rise despite this. The 12-month net absorption rate is at 1.8 million sq. ft. and increasing, and the vacancy rate is at 3.6% and also trending upward.

There are 82 million sq. ft. of retail space available in San Francisco, again the same as last month but expected to drop. More is coming, with about 654,000 sq. ft. under construction and a 12-month absorption rate of 232,000 sq. ft. and rising. Vacancy rates are continuing to decline, at 2.4%.

The multifamily market is slowly growing, up to 165,000 units available in the inventory. Construction is on the upswing here, both from last month and in future projections, at 6,500 units. The 12-month net absorption rate is 2,000 units and rising, with vacancy rate of 3.9%, the same as last month but 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.

Noel Carrillo joins NAI Northern California as Investment Advisor in San Francisco

NAI Northern California is pleased to announce that Noel Carillo has joined as Investment Advisor in San Francisco. Noel specializes in multifamily properties. He has called San Francisco home for nearly a decade, seeing the City evolve over one of its most transformative eras, and now brings that local awareness to his clients in a manner that transcends the transaction and commits to long-standing relationships through open communication and transparency.

Noel is originally from San Diego and is currently attending City College of San Francisco, where he is pursing his degree in Economics. His professional enthusiasm extends into his personal life where, aside from cherished downtime with friends and family, he pursues adventures like saltwater sportfishing–frequently netting yellowfin, bluefin, and yellowtail tuna–and travels to such far-off locales as Japan, Singapore, and Indonesia.

Learn more about Noel Carillo

5 US cities with the highest cost of living

According to a recent report by Move.org, the Bay Area’s major cities continue to rank in the top five for the highest cost of living nationwide. San Francisco holds the top slot, with New York City close behind, followed by San Jose, Oakland, and Boston. The report measured the average monthly cost for rent (a 1-bedroom apartment), food (groceries and some restaurant meals), gas, utilities (electricity, water, etc.), and internet for each city.

Surprising no one, San Francisco, California is the most expensive, with rent among the highest in the nation; rent makes up 80% of the $4,210.60 monthly cost of living in the city. The city also has some of the highest gas prices at $197.88 per month, though residents who commute via bike or public transit can avoid these costs. Food is expensive, around the 80th or 90th percentile, but utilities are comparably cheap at $123.22 per month, about 30% of the national average. Internet costs are pretty middle-of-the-road compared to other cities, averaging about $66.62 per month.

New York, New York is just $250 behind SF, with an average cost of living of $3,956.11. Food is the problem here, costing over twice as much as San Francisco, at $468.60 per month. Rent is also extremely high, at $3,126.35. Gas is more expensive than the national average, around the median value, at $155.55 per month, and internet is just about average at $62.77. Utilities cost a little less than elsewhere, around $142.84 per month.

San Jose, California is the third most expensive city to live in, with lower rents than SF or New York but high gas prices and above-average food costs. The $3,289.07 cost of living includes $2,555.85 for rent, $186.15 for gas, $359.85 for food, $63.36 for internet, and $123.86 for utilities (significantly cheaper than the national average).

Despite Oakland’s reputation for being cheaper than the City, its cost of living is still fourth-highest nationwide, at $3,212.14 per month, only about $1,000 less than San Francisco. Rent and gas are the highest costs compared to the median, at $2,481.65 per month and $175.95 per month. Food is just a little more expensive than the national average, around the 30th percentile, at $347.33 per month. Internet and utility costs are pretty average, at $65.00 and $142.21.

In the last spot of the top five is Boston, Massachusetts, with New York’s high rent and food costs. An average cost of living of $3,211.51 includes $2,420.26 for rent, $435.78 for food, $145.35 for gas, $62.97 for internet, and $147.15 for utilities.

Source: Move.org

Bay Area cities rank in top 10 for most LEED units

California has more LEED-certified multifamily properties than any other state, over 57,000 units worth, and the Bay Area has over 12,000 of these green apartments and condos, with three cities ranking in the top ten statewide. Just behind Los Angeles, San Francisco ranks #2 for the most LEED units, at 8,090, and San Jose is just two spots behind at #4 and 2,545 units. While Oakland hasn’t quite caught up to these levels, it still ranks in the top ten, at #8 with 1,648 units. 

According to Multi-Housing News, “While LEED certification positively impacts the health and well-being of people, as well as the planet, it’s a valuable feature for investors, as it translates to faster lease-up rates and higher resale value.” Owners of LEED multifamily buildings are primarily real estate investment trusts; AvalonBay Communities, owner of the various Avalon, AVA, and eaves complexes in the Bay Area, and the Essex Property Trust, owner of over 80 Bay Area buildings, hold over 9,000 units between them.

The green housing trend really took off in 2008, jumping from 315 LEED-certified apartments and condos statewide in 2007 to 1,947 the next year. The numbers continued to grow through 2017, with a slight dip last year from 7,378 in 2017 to 6,185 in 2018. The developments still are mostly an urban trend, clustered in and around California’s major population centers, though the report only included communities with at least 50 residential units.

Source: Multi-Housing News

NAI Northern California volunteers with Project Open Hand in San Francisco

On Tuesday, August 13th, NAI Northern California and Piedmont Financing volunteered with Project Open Hand in San Francisco. Six brokers, staff, and advisors from the companies’ San Francisco office worked at the Grocery Center peeling and chopping sweet potatoes for sick and vulnerable people in the Bay Area. Project Open Hand’s volunteer coordinator, Kelly Wong, described the nonprofit’s origin during the AIDS crisis and their mission of providing healthy, nutritious meals to people with critical illnesses.

The team donned hairnets, gloves, and aprons, except Investment Advisor Kevin Royer; he had read the instructions and worn his own hat. (The rest of the volunteers were a little jealous, as they felt hairnets were not the most flattering look.) As the team got started, another of Project Open Hand’s coordinators gave them a quick lesson in sweet potato peeling techniques before they set to work. When almost all the potatoes were peeled, most of the team switched to chopping the potatoes into cubes; another volunteer at Project Open Hand taught knife safety and dicing skills.

By the time the volunteer shift was over, they had peeled and diced five cases (135 pounds) of sweet potatoes, over twenty pounds per person. Market analyst Cole Byrd said, “Project Open Hand was a fun and eye-opening experience that makes you realize that a little effort can go a long way for the community. It was also a great time to bond with coworkers; I found it a very fulfilling experience.”

Investment advisor Trey Sells, who also volunteered at the Oakland location last month, said, “”I loved seeing how a small donation of our time and teamwork was able to produce such a large amount of prepared food for the community.”

“Learning that this massive operation started with one woman cooking for people after work is living proof that big dreams with powerful impacts really come true,” said Investment Advisor Kevin Royer (with the hat). “Taking a couple of hours out of the day to help feed over 2,500 people in need gave me a great feeling, and it was amazing to see how our small role could have such a great effect on thousands of people throughout San Francisco. Plus it is always nice to connect with colleagues over non-work stuff while still being productive. And I became a professional in the kitchen after only a few hours!”

In a thank-you letter from Project Open Hand, their volunteer coordinator wrote, “The amount of hard work, energy, and enthusiasm your group brought was much appreciated! Thank you for your generous donation of 2.5 hours of service. We look forward to working with you again in the future.”

See all the photos from the event on NAI Northern California’s Facebook page.

ABOUT PROJECT OPEN HAND

Founded in 1985, Project Open Hand is a nonprofit organization that provides meals with love to critically ill neighbors and seniors. Their food is like medicine, helping clients recover from illness, get stronger, and lead healthier lives.

Every day, they prepare 2,500 nutritious meals and provide 200 bags of healthy groceries to help sustain their clients as they battle serious illnesses, isolation, or the health challenges of aging. They serve San Francisco and Oakland, engaging more than 125 volunteers daily to nourish their community.

Learn more or sign up to volunteer at OpenHand.org 

Top investment sales firm NAI Northern California continues expansion in first half of 2019

Leader in Bay Area multifamily, retail, and office investment sales and leasing transactions has aggressive growth plan

SAN FRANCISCO, CA – August 21, 2019 – As the second quarter of 2019 has come to a close, Bay Area commercial real estate brokerage NAI Northern California has continued its expansion with an aggressive growth plan. President James Kilpatrick remarks, “We are well on track to top our total sales volume this year as we expand our team and continue to develop tech-forward strategies to serve our clients.”

NAI Northern California and its brokers were recognized both locally and nationally in the first half of the year. The brokerage was ranked as a Top Sales Firm by CoStar in both the San Francisco and East Bay/Oakland markets, and vice president Tim Warren was named a Top Sales Broker for his work in the East Bay/Oakland market. Investment advisor and rising star CJ Brill was awarded a scholarship for the International Council of Shopping Centers’ RECon conference in Las Vegas. The company’s top-producing agent for Q1 through Q2 was senior investment advisor Rudas Gebregiorgas, followed closely by Mary Alam, Grant Chappell, Alex Barker, Doug Sharpe, Joby Tapia, Tim Warren, Kent Mitchell, Jordan Geller, and Joshua Ballesteros.

The company expanded into the greater Silicon Valley area with the hire of Tod Rudee as Executive Vice President in San Jose. Tod brings nearly 30 years of extensive experience in commercial real estate strategy, transaction services, and brokerage performance management in Silicon Valley. His previous background includes leading the San Jose office as Managing Director for CBRE as well as management roles with Colliers International and Premier Properties. 

The majority of the company’s business was multifamily investment sales for Q1 and Q2. Notable sales included Joby Tapia’s $18 million sale of the Central Valley Homes Apartments, a 24-unit complex in Mill Valley; the Mitchell Warren Team’s $14 million sale of 44 units at 888 Vermont Street in Oakland; and the $11.3 million sale of the Terrace at Fair Oaks complex in Carmichael by Rudas Gebregiorgas and Grant Chappell.

For the first two quarters of 2019, single tenant NNN and multi-tenanted retail center sales were a close second. The $25 million in sales completed by the Mary Alam Team included a $6.7 million Walgreensa $3.8 million retail complex in Tracy, and a $3.65 million Regal Cinemas sold by the Mary Alam Team and Ganga Balebail.

Industrial and office properties rounded out NAI Northern California’s sales for the first half of the year. The most notable assets were a $12 million mixed-use development site in South Beach, San Francisco sold by Alex Barker; a $2 million office/warehouse building in West SOMA, San Francisco sold by the Geller Williams team; and a $2.5 million medical office redevelopment deal in San Jose sold by the Mary Alam Team. Vacant land and mixed-use buildings made up the rest of the properties sold by the brokerage. 

Commercial leasing is an increasing part of the company’s business, with leases to boutique and multinational businesses from a range of industries. Spaces leased by NAI Northern California during Q1 and Q2 ranged from 1,100 square feet to 35,000 square feet, for both office and industrial uses. 

Coming into the second half of the year, NAI Northern California has an aggressive growth plan and is currently hiring commercial real estate agents and senior investment sales advisors for all their offices (San Francisco, Oakland, and San Jose) as well as additional leadership roles for both their San Francisco and Oakland offices. Community outreach and volunteering efforts have also been a key component of company life with volunteer days at Project Open Hand in Oakland and San Francisco.

 

About NAI Northern California

NAI Northern California is a full service commercial real estate firm serving the San Francisco Bay Area and beyond. Our team delivers technology-enabled commercial real estate services that create value for our clients, industry, and communities.

NAI Northern California is a partner of NAI Global, the largest commercial real estate brokerage network with more than 350 offices worldwide and over 6,000 professionals completing in excess of $20 billion in commercial real estate transactions globally.

Recently on the San Francisco Business Times Book of Lists, NAI Northern California hit the top 5 and 6 spots in San Francisco and the East Bay and top 10 Bay Area wide. NAI Northern California is part of the NAI Global network, recently recognized by Lipsey as the number 4 most recognizable commercial real estate brand.