Queuing Up For Office Development In San Francisco

Future_SF_Skyline

With all due respect to Austin and its unofficial city motto, San Francisco had the “keep it weird” rallying cry long before that upstart. It follows, then, that development of almost any sort has been a tricky prospect for many years in this progressive city. Yet it does occur albeit under the close scrutiny of local government and a myriad of watchdog groups.

THE BACKGROUND
Though there are many moving parts (rules, regulations, zoning, processes, etc.) to office development in San Francisco, two items stand out above the rest.

Read the rest of this entry »

Ports Of Los Angeles & Long Beach: The Aftermath – Back To Normal?

Port

Negotiations to replace the ILWU-PMA contract that had expired in July 2014 dragged on far longer than anyone had anticipated. After nine months of negotiations that contributed to monumental cargo backlogs at West Coast ports, the ILWU and the Pacific Maritime Association finally agreed on a tentative five-year contract in February and the tentative agreement is awaiting ratification.

The agreement is a great relief, across the globe, but particularly in Southern California. The five-year contract is shorter than usual, however, which has everyone concerned with the prospect of more trouble ahead. The labor dispute has left many in the shipping and logistics industries with a level of anger that will take some time to overcome, perhaps longer than anyone is expecting. Assessing the long term damage caused to the Southern California ports will probably take more than a year to really sort out.

Read the rest of this entry »

Brazil: A Sort Of Quagmire

Brazil
On February 8th, The Economist printed a major article entitled, “In a quagmire,” about recent economic events in Brazil. The article was on point, and does a good job of explaining what the country is going through; politicians wagging the dog, soaring inflation, eroding consumption, deteriorating fiscal accounts, corruption scandals (i.e. Petrobras), and a major currency devaluation. All of this is wearing out the incumbent party, which is increasingly having difficulties maintaining popular support.  The article, however, says little about prospects, and, by reading it, one might think that the country is heading into a total collapse– which is simply not true.

Read the rest of this entry »

Capital Flows Shaking Things Up In San Francisco

San_Francisco

Capital flows continued to shake up the San Francisco office market in 2014. Deal volume set yet another record during the year while prices climbed to unprecedented highs thanks to more and more investors having a mandate to invest in the City by the Bay. Most interesting to note, however, is that in this cycle, more foreign buyers have been taking a stake in San Francisco.

A ground rattling 13.9 million square feet of space was sold in 2014 totaling $6.8 billion, a new record high for this recent up cycle. In dollar volume, this was nearly three times the amount that traded in 2013. While this was sizeable, it was still below the previous cycle’s peak in 2007 when nearly 22.4 msf of product was sold for a total of $9.0 billion.

Read the rest of this entry »

It’s Going Down – A Wave of Redevelopment to Lure Tenants Back to the CBD Submarket?

Construction

In recent years D.C. has seen a number of its largest, most prominent, tenants shifting eastward to be in or around new developments in the Metro Center, Gallery Place, and Mount Vernon triangle areas. Covington & Burling was the first, shifting its address from Pennsylvania Avenue to mega-development CityCenter DC. This year, Norton Rose Fulbright will move from Market Square to the newly renovated 799 9th Street NW and Arnold & Porter will leave 555 12th Street NW for the new 601 Massachusetts Avenue NW. Venable will finalize its move from 575 7th Street NW to Boston Properties’ new 600 Massachusetts Avenue NW in 2017. As a result of these, and similar moves, the East End has tightened substantially in the last four quarters, with class A overall vacancy declining 4.4 percentage points year-over-year to end 2014 at 9.9% – a number not seen since before the Great Recession.

Read the rest of this entry »

Boston: Room to View at the Top

Boston

As the Boston CBD began recovering from the last recession, an interesting shift occurred in its 29.36 million square feet (msf) class A tower market¹. Low-rise space (floors below the twentieth) is now in higher demand than high-rise space. Traditionally, high-rise product was quickly absorbed from the market by stalwart tenants in the financial and legal services sectors who were willing to a pay a premium for the city’s best views. Low-rise space, which was typically used to house back office operations of financial services firms, moved more slowly from the market, keeping vacancy levels comparatively elevated for longer periods of time.

Read the rest of this entry »

Data Center Snapshot

DCSS

The U.S. data center market exhibited a robust year of leasing in 2014, building from leasing momentum established late in 2013. The most vibrant markets were Dallas and Northern Virginia, with each geography tallying nearly 40 MW of new data center leases. Dallas, in particular, captured some of the largest wholesale deals in the country in 2014, including: LinkedIn (7 MW), T-Mobile (4.5 MW) and State Farm (6+ MW).

Read the rest of this entry »

Prices Have A Say In Mexico City’s Office Market

Mexico City

What makes a real estate market attractive? Is it high profits for developers? Highly competitive prices for tenants and demand-side investors?

Naturally, these are significant drivers for market activity, but in both cases basic economics prevail: People are willing to take a higher risk in exchange for higher returns.

Now, the tricky part is how to discern when risk is being properly rewarded. More rigid, slow-to-adjust markets are generally harder to read, which correlates with higher risk.

Read the rest of this entry »

Atlanta’s Industrial Market Sees Record Construction Activity

Atlanta Industrial Construction

Industrial construction activity in Atlanta increased dramatically in 2014 ending the year with more than 15 million square feet of inventory under construction, a new record for the market. Although build-to-suit development accounted for the majority of industrial construction activity in recent years (an average of 76% between 2009-2013), 2014 marked a major shift in this trend as speculative construction activity took over, accounting for almost 60% of total inventory under construction. There were 19 speculative projects underway as of 2014 year-end totaling nine million square feet. All of these are expected to deliver in 2015.

Read the rest of this entry »

San Francisco Jobs Hit Record High

SF Jobs

According to the latest job numbers released by the State of California Employment Development Department on November 21, total jobs in the San Francisco Metropolitan Division (comprised of San Francisco, San Mateo and Marin counties) continue to climb ever higher – the area, in fact, hit a record high number of jobs in October with 1,125,300 now employed, blasting past the previous high of 1,117,700 recorded in December 2000 The unemployment rate for the three-county division stood at 4.2% in October, equal to the September figure though down a rather sharp 110 basis points from one year earlier.

Read the rest of this entry »