By Robert Sammons, Regional Director – Northwest U.S. Research
Now a moment regarding the San Francisco office report. As written about extensively in last week’s Rant, the office market was relatively flat but that is coming off years of record economic growth. That expansion was not sustainable and some cooling has not only been expected but should be welcomed so as not to push tenants out with minimal availability and ever-higher rents. I also mentioned the real concerns I have for this market. Please take a look at last week’s editorial along with the full report now available. As might be expected, the data was picked up by the press with spot on accuracy except possibly the headline in one publication which was rather dramatic. I’ve included the link below for full disclosure and I’ll let you tell me what you think if you like.
Across the Bay Bridge to Oakland, we find a market still in transition. The vacancy rate did climb in the third quarter due to a few rather large chunks of space hitting the market. Even so, Oakland, and particularly its CBD, remains space constrained and these new blocks should be good news for tenants searching for a transit-oriented home in the East Bay. Asking rents continued to rise and are at record levels though still substantially below those of its big brother to the west. And while I would stop short in calling Oakland the new Brooklyn (I am, after all, a former 19-year resident of NYC), it has transformed itself into a vibrant mixed-use transit-oriented community which “should” continue to blossom in the years ahead.
Down in Silicon Valley, the office market got back on track in the third quarter with a drop in the overall vacancy rate though sublease space was on the rise. Leasing activity had its best quarter of the year – particularly from well-known market players (Google and Facebook in yet further expansions). Let’s not forget the auto industry, which has become a more significant player in Silicon Valley than I imagine anyone would’ve thought just a few years ago, with Ford expanding in a big way this quarter. Meanwhile, the overall average asking rent surpassed its previous record set fifteen years ago, closing well above the $4.00 per square foot (per month) mark. And construction activity, at 5.3 million-square-feet (MSF), has much more in common with San Francisco (3.8 MSF) than East Bay Oakland (270,000 square feet). With new products constantly being developed (AI, robotics, self-driving cars, etc.) the only things stopping Silicon Valley will be traffic and the cost of living (the primary issues across the Bay Area).
Enjoy the reports. I’ll be back next week with details on the Peninsula, Walnut Creek, North Bay and Sacramento markets.
This post is guest commentary from the latest weekly edition of our Bay Area Research Rant, which you can subscribe to for free by e-mailing email@example.com.
Robert Sammons is a Research Director for Cushman & Wakefield. Based in San Francisco, Robert’s principal roles include working closely with the C&W research teams across the Northwest – including Northern California, Portland and Denver. Robert is author of numerous documents that delve into a wide variety of real estate and economic trends. He has been a quoted source for all manner of real estate and related economic information in many widely known media outlets across the country. Robert has 29 years of real estate experience as both an appraiser and researcher. He earned a BBA in Real Estate from The University of Georgia and an MS in Real Estate from Georgia State University. Robert is a member of the Urban Land Institute.