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Market Pulse: South 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 South 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 East Bay, and the North Bay.

The Data

Office Properties: This month, the South Bay office market’s inventory is slightly up from October at 131 million sq. ft. and expected to continue to rise. Approximately 6.8 million sq. ft. are under construction, way down from October, but this figure is trending upward. The 12-month net absorption rate is down to 2.7 million sq. ft. of office space, with an inconsistent pattern the last few months and projected to reverse again into an increase. The vacancy rate is at 8.6 percent, half a percent up from October and expected to drop.

Industrial Properties: For the industrial market, 197 million sq. ft. of space is in the inventory, the same as the last few months, but this figure is expected to increase any day now. The space under construction is also projected to rise, at 995,000 sq. ft. (way up from August, September, and October). The 12-month net absorption took a sharp dip, at 316,000 sq. ft., but is on an upward trajectory. The vacancy rate is slightly higher than in September and October, at 6.1%, but is expected to go back on the decline.

Retail Properties: There are 79.8 million sq. ft. of retail space available, barely up from last month. The space under construction is also marginally up over the last three months, at 1.2 million sq. ft., and is expected to increase despite the holiday season. The 12-month net absorption rate shot from -12,000 sq. ft. in October to 53,000 this month. Vacancy rates are just slightly down at 3.3% and projected to continue to decline.

Multifamily Properties: The multifamily market is holding strong at 146,000 units available in the inventory, slightly more than last month and the month before. Construction is at 9,500 units and expected to continue to increase. The 12-month net absorption rate is 2,600 units, marginally up from the last few months and projected to continue to rise. The vacancy rate is at 4.9%, slightly up from October, 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: 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

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

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.

Market Pulse: North Bay, August 2019

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

Check out our August 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 holding flat, with 12-month net absorption down at 127,000 sq. ft. of office space. Approximately 17.2 million sq. ft. are under construction with an upward trend. The vacancy rate is at 7.4 percent and expected to drop.

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 231,000 sq. ft., and the space under construction is also rising, at 1.1 million square feet. The vacancy rate is at 3.4% and holding steady.

There are 65.6 million sq. ft. of retail space available and rising, with a 12-month net absorption rate at 113,000 sq. ft. (a decreasing trend). More is being built, though, with 72,000  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 52 units across the North Bay area and is dropping. Construction is on the upswing here, at 557 units, with a rising vacancy rate of 5.4%.

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, August 2019

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

Check out our August 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 2.7 million sq. ft. of office space. Approximately 6.2 million sq. ft. are under construction with an upward trend. The vacancy rate is at 8.3 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 844,000 sq. ft., and the space under construction is also rising, at 771,000 square feet. The vacancy rate is at 5.7% and trending downward.

There are 79.9 million sq. ft. of retail space available and dropping, with a 12-month net absorption rate of 78,000 sq. ft. (a decreasing trend). More is being built, though, with 1 million sq. ft. under construction. Vacancy rates continue to drop, at 3.3%.

The multifamily market is holding strong, up to 144,000 units available in the inventory. The 12-month net absorption rate is 2,500 units and rising. Construction is on the upswing here, at 1,000 units. The vacancy rate is at 4.3% and dropping.

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: 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.

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