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Bay Area Research Rant: Office Markets Around the Bay – Part III

By Robert Sammons, Regional Director – Northwest U.S. Research

golden_gate_bridge_nightOver the past couple of weeks, I’ve focused on our third quarter office statistics for various Bay Area markets. First up was San Francisco followed up last week by a review of Oakland and Silicon Valley along with additional information on San Francisco. This week, I thought I’d peel back another few layers and discuss the San Mateo County (otherwise known as The Peninsula), Walnut Creek, Pleasanton and Marin & Sonoma counties (otherwise known as North Bay). Yes – we do cover a LOT of territory in this very broad and rather disparate region. As always, for much more detail, please visit our website where all our reports (Bay Area, US and Global) can be found.

San Mateo County aka “The Peninsula”

The Peninsula market continued to tighten in the third quarter with the vacancy falling 10 basis points (BPS) to 7.5% (combined office and R&D), the lowest it’s been since the turn of the 21st century. Since 2009, that figure has tumbled from 17.2%. And though up minimally in the third quarter, the average asking rent has zoomed almost 75.0% higher since the “Great Recession.” With space tight, net positive absorption has pulled back from the record years of 2014 and 2015 but has still been impressive thus far in 2016. Sublease space has risen slightly and could actually be helpful in taken some of the pressure of tenants searching for a spot to call home. There is some new construction underway but likely not enough to satisfy demand. Look for further announcement on projects in North County – especially those geared towards the life sciences industry.

Walnut Creek

The vacancy rate has been on quite the downhill slide over the past year in the greater Walnut Creek market (WC), plummeting some 250 BPS to close the third quarter at 10.7%. Though it has a relatively small office inventory of 14.9 million square feet (MSF), WC is quite diverse with those submarkets near BART (Bay Area Rapid Transit) or near a convenient freeway interchange historically performing better and thus achieving higher rents. Compared to the major office markets to its west (whether San Francisco or Oakland), greater Walnut Creek certainly will remain a cost-effective alternative for some time to come.


Pleasanton has been a tale of two markets recently. On the one hand, there has been strong leasing activity at both Bishop Ranch in San Ramon and Rosewood Commons in Pleasanton. On the other hand, there have been some space givebacks and we are anticipating two more significant ones that will add almost 700,000 SF of vacancy to the market. Vacancy did tick up 40 BPS during the third quarter to finish at 9.6% (for combined office and R&D). Meanwhile, asking rents remain rather flat, closing the third quarter at $2.42 PSF for office (full service) and $1.35 PSF (triple net) for R&D. Not surprisingly, there is no speculative development anticipated.

North Bay

The combined Marin and Sonoma County markets has flown under the radar for a while now but no longer. The office closed the third quarter with strengthening fundamentals as the vacancy rate dropped to just 10.0%, the lowest in almost 10 years. Asking rents continued their rise for the fifth quarter in a row, closing at $2.25 PSF on a monthly basis and up almost 12.0% from a year ago. Both Marin and Sonoma counties recorded lower vacancy and higher asking rents. In fact, Marin County hit its highest asking rent since the fourth quarter of 2001. So what’s driving this market tightening? Well its leasing activity of course which has been on the rise recently with local companies moving about and expanding. With only 128,000 SF under construction, the 23.8 MSF North Bay market is likely to see more of the same over the next few quarters.

Well that is it for this week – lots of data and analysis to mull over. Please don’t forget to check out the full reports from our crack team of researchers who all do an amazing job keeping up with all the goings on regarding their markets. Next week – more info on yet more 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 robert.sammons@cushwake.com.

Robert_SammonsRobert 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.

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