By Robert Sammons, Senior Director, Northern California Research
This week we have released our latest look at stats on Bay Area Downtown/Core markets and how they compare with the larger markets surrounding them. These Downtown/Core markets are also ones with convenient transit – be that Muni (rail), VTA, BART, Caltrain, Amtrak and/or ACE. Click here to check out our new Q2-19 map.
So what is the transit effect at mid-year 2019? Well more or less the same as it has been for a while: that these markets are superior performers than those away from convenient transit. That obviously translates to properties that have a lower vacancy rate and a higher asking and effective rent than those requiring that extra step to reach, whether via car or shuttle bus, for instance. It doesn’t necessarily mean that quality properties off the transit grid can’t perform well, as there are always other factors involved and not everyone is willing or able to take mass transit. But it is another feather in the cap when properties do have more direct access to Caltrain or BART. Ride-sharing has already made a dent in what had been steady increases in rail ridership for various reasons, including reasonable costs, convenience, poor system maintenance, and (seemingly incongruous) overcrowding at peak times. Eventually autonomous vehicles may change the dynamics even further.
That said, many employers and employees seem to favor transit availability, along with mixed-use developments, if even just focusing on the metrics on this map. There are a few exceptions regarding a higher vacancy in the downtown submarkets of Mountain View and Sunnyvale, in particular. That will change shortly, though, thanks to recent lease transactions. Asking rents are (almost) across the board higher within the downtown submarkets with the one exception currently being Berkeley. That is because most of the vacant space there is Class B with very little Class A on the market.
In the larger downtown submarkets of San Jose, San Francisco and Oakland there are major influxes of development. All three of these areas are in different stages: the Oakland CBD changes are well underway with new office and residential while the San Jose CBD is prepping for a huge boom across the office, residential and hotel categories. In San Francisco, where its CBD is almost completely built out, the Central SoMa rezoning and massive development expected is partially being driven (pardon the pun) by the new Muni Central Subway line expected to open in late 2019/early 2020, and which will better connect that area with Mission Bay (Caltrain) up to Powell Street (BART and other Muni lines).
There are numerous stories on transit that have just recently hit the presses, including the first one below from CITYLAB on how startups prefer those markets with good transit. Although this story focuses on a few core CBD markets across the country, it does lend further credence to the statement that transit remains vital to tech companies as well as other businesses. Caltrain is looking to spend a lot of money on its services and expecting to handle many more riders going forward–how that happens exactly remains to be seen. San Francisco hometown company, Cruise, wants this to be the spot where it first rolls out its robot-taxis though there are many hurdles still to overcome. And SFO has a new terminal with more changes to come.
Scrolling further down to real estate news, it’s just another week for Silicon Valley with deals completed by big tech and lots of new development announcements for downtown San Jose (see downtown transit effect chat above to find out a big reason why!).
This post is commentary from the latest weekly edition of our NorCal Newsline, which you can subscribe to for free by e-mailing firstname.lastname@example.org.
Robert Sammons is Cushman & Wakefield’s Senior Director, Northern California Research. 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.