bay area suburban office/r&d market overview
DESCRIPTION
Bay Area Suburban Office/R&D Market Overview. C. Michael Kamm, CEO Cassidy Turley | Northern California. Bay Area Market. Recovery vs. Stagnation ? Where Are We?. Recovery? Yes…for some a boom… Stagnation? Yes…for some…but probably not for long… - PowerPoint PPT PresentationTRANSCRIPT
C. Michael Kamm, CEOCassidy Turley | Northern California
Bay Area Suburban Office/R&D Market Overview
Bay Area Market
Recovery vs. Stagnation? Where Are We?
Recovery? Yes…for some a boom…
Stagnation? Yes…for some…but probably not for long…
Commercial real estate demand still comes down to job growth
Source; BLS
Sacramento, CANewark, NJ Edison, NJ
Oakland, CA Dayton, OHBoston, MA
Louisville, KYMilwaukee, WICincinnati, OHSt. Louis, MO
Kansas City, MOSan Diego, CA
Indianapolis, INRaleigh, NC
Columbus, OHSan Francisco, CA
Nashville, TNDenver, CO
Baltimore, MDCharlotte, NC
Tampa, FLPhoenix, AZ
San Jose, CAAtlanta, GA
Minneapolis, MNDC Metro
Chicago, IL Dallas, TX
Houston, TXNew York, NY
-10 0 10 20 30 40 50 60 70 80 90
-8-3-2-2
666
8899101011
131618181819
202324
2929
3139
4265
85
From 2010 to 2011 (Thousands)
Source: Bureau of Labor Statistics
Change in employment
DenverOaklandHouston
DallasPhoenix
San JoseColumbus
BaltimoreIndianapolisRaleigh
Boston
Atlanta
Northern NJ
Central NJ
San FranciscoDC Metro
San Diego
CincinnatiChicago
SacramentoNashville
MinneapolisKansas City
St. Louis, Charlotte, Milwaukee
Dayton
Strong Momentum
Moderate
Weak/Declining
1.0%
0.5%
0.0%
-1.0%
Tampa
NY City
Market Momentum in 2012 Job Growth, 3 month moving average, % change
Source: Bureau of Labor Statistics
Marin
San Mateo
Tri-Valley
North I-680East Bay
Silicon Valley
Bay Area Office | Q1-2011 Q1-2012Inventory SF 252,844,686 253,622,896
Total Availabilities 40,047,637 34,094,855
Vacancy 15.84% 13.44%
Avg. Asking (FS) $2.49 $2.70
4Q Trailing Net Abs. 4,659,032 6,730,991
San Francisco
Bay Area R&D | Q1-2011 Q1-2012Inventory SF 194,116,011 192,687,318
Total Availabilities 33,663,765 34,094,855
Vacancy 17.3% 14.8%
Avg. Asking (NNN) $1.11 $1.24
4Q Trailing Net Abs. 1,901,289 3,739,550
Bay Area Office/R&DVacancy Rate Trend
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120%
5%
10%
15%
20%
25%
2.1%
19.2%
10.9%
17.5%
13.4%
2.0%
24.5%
15.9%
19.0%
14.8%
Office R&D
Source: Cassidy Turley Research
Bay Area Office/R&DNet Absorption Trend Combined (MM Sq. Ft.)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q1 '12-40,000,000
-30,000,000
-20,000,000
-10,000,000
0
10,000,000
20,000,000
30,000,000
40,000,000
Office R&D
+34.0MM -59.6MM +33.9MM -16.1MM +15.6MM
Source: Cassidy Turley Research
Bay Area Office/R&D Annual Change in Avg. Asking Rate
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012-70%
-50%
-30%
-10%
10%
30%
50%
Office R&D
OFFC: -71%R&D: -119%
OFFC: +41%R&D: +51%
OFFC: -18%R&D: -23%
OFFC: +8%R&D: +10%
OFFC: +80%R&D: +244%
Source: Cassidy Turley Research
San FranciscoSan Mateo
New York
San JoseCincinnati
Boston
Phoenix
Houston
Baltimore
Long Island
Suburban MD
Suburban VA
Chicago
Tampa
Dallas
Indianapolis
Atlanta
Northern NJ
Nashville
DenverKansas City
St. Louis
Charlotte
Sacramento
Source: Cassidy Turley Research
Strong Growth Greater than 4%
Moderate1 to 4%
Flat
Small declines0.5% to -2%
Large DeclinesWorse than -2%
Central NJMinneapolis
Milwaukee
Dayton
Raleigh
Columbus
Oakland-East Bay
Louisville
San Diego
DC
Office Rent Snapshot Q1 2012 vs. Q1 2011, Y/Y % Change
Source: Cassidy Turley Research
San Rafael12.8% | $2.44
Green./Larkspur7.3% | $3.79
Novato18.4% | $2.18
Corte Madera9.9% | $3.00
Saus./Tiburon10.9% | $2.76
Mill Valley22.5% | $3.60
Vacancy Thematic: <10% 10% - 14.9% 15% - 19.9% 20% - 24.9% ≥25%
Marin County | Q1-2011 Q1-2012Inventory SF 9,701,824 9,702,000
Total Availabilities 1,911,659 1,392,000
Vacancy 19.7% 14.3%
Avg. Asking (NNN) $2.41 $2.51
4Q Trailing Net Abs. -25,198 520,086
Source: Cassidy Turley Research
S. San Francisco 30.6% | $3.53
San Bruno/ Millbrae 4.7% | $2.23
Brisbane 38.5% | $2.88
Daly City 19.3% | $2.22
Burlingame 12.6% | $2.15
San Mateo 14.2% | $2.65
Foster City 9.3% | $3.07
Redwood Shores 7.4% | $3.25
Belmont/San Carlos 26.4% | $2.56
Redwood City 10.7% | $3.32
Menlo Park 10.3% | $7.24
Vacancy Thematic: <10% 10% - 14.9% 15% - 19.9% 20% - 24.9% ≥25%
San Mateo Cty | Q1-2011 Q1-2012Inventory SF 31,105,052 31,105,520
Total Availabilities 4,708,314 4,186,000
Vacancy 15.1% 13.5%
Avg. Asking (NNN) $2.88 $3.26
4Q Trailing Net Abs. 704,175 522,100
Source: Cassidy Turley Research
Net 850KRent 20%
Net 700KRent 10%
Net 640KRent 10%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0%
5%
10%
15%
20%
25%
30%
$0
$1
$2
$3
$4
$5
$6
$7
Vacancy Avg. Asking Rate (FS)
F O R E C A S TAnnual Growth
Historical & Forecast Vacancy & Rents (Class A)
San Mateo County Office
Source: Cassidy Turley Research
Campbell 13.1% | $2.48
S. San Jose 13.9% | $1.71
San Jose-DT 23.0% | $2.31
N. San Jose18.8% | $2.31
SJ-Airport 22.6% | $2.21
Milpitas 13.7% | $1.69
Mt. View 5.7% | $3.71
Palo Alto 4.5% | $5.50
Sunnyvale 13.8% | $3.32 Santa Clara
19.9% | $2.04
Cupertino 3.3% | $3.05
Los Gatos-Saratoga 10.9% | $2.95
Civic Center 11.1% | $1.62
W. San Jose 9.2% | $1.94
Fremont 13.3% | $2.02
Vacancy Thematic: <10% 10% - 14.9% 15% - 19.9% 20% - 24.9% ≥25%
Silicon Valley | Q1-2011 Q1-2012Inventory SF 63,831,604 64,035,000
Total Availabilities 10,496,421 8,516,000
Vacancy 16.44% 13.3%
Avg. Asking (NNN) $2.75 $2.70
4Q Trailing Net Abs. 2,055,633 2,183,301
Source: Cassidy Turley Research
Net 6.0MRent 10%
Net 6.0MRent 15%
Net 7.5MRent 20%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0%
5%
10%
15%
20%
25%
$0
$1
$2
$3
$4
$5
Vacancy Avg. Deal Rate (NNN)
F O R E C A S TAnnual Growth
Historical & Forecast Vacancy & Rents
Silicon Valley Office/R&D
Source: Cassidy Turley Research
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
400,000.0
2,400,000.0
4,400,000.0
6,400,000.0
8,400,000.0
10,400,000.0
12,400,000.0
0
20
40
60
80
100
120
140
Q Ending Total Number of Tenants
Silicon Valley Requirements – Historical Volume Tracking
Squa
re F
eet (
Mill
ions
)R
equirements
Requirements
Volume SF
Silicon Valley Office/R&D
Demand near a 10-year high Average size of requirements has grown significantly
Source: Cassidy Turley Research
Silicon Valley Market Drivers
Apple… controls close to 7MM SF in
Cupertino, over 80% of that market, pushing tenants east
has leased 1.15M SF in Sunnyvale over the last year.
Is negotiating an another ±1M square feet in Sunnyvale.
Sunnyvale’s vacancy is declining fast and rents are rising forcing tenants to move east
Source: Cassidy Turley ResearchOffice/R&D Vacancy as of March 16, 2012
Average Rates Q4 2010 & 2011
Richmond25.2% | $2.17
Berkeley CBD10.5% | $2.42
West Berkeley 10.5% | $2.37
Emeryville 18.1% | $2.49
Lake Merritt15.1% | $2.38
City Center13.8% | $2.27
Jack London Sq.12.5% | $1.50
N. Alameda36.3% | $2.10
S. Alameda26.8% | $1.74
Coliseum-Airport28.0% | $1.74
Vacancy Thematic: <10% 10% - 14.9% 15% - 19.9% 20% - 24.9% ≥25%
Source: Cassidy Turley Research
East Bay I-80 | Q1-2011 Q1-2012Inventory SF 32,069,079 32,168,079
Total Availabilities 5,424,090 5,791,545
Vacancy 16.9% 18.0%
Avg. Asking (NNN) $2.10 $2.15
4Q Trailing Net Abs. 31,540 -268,455
Pleasant Hill 7.2% | $2.19 Concord
15.7% | $1.78
WC-Shadelands 23.5% | $1.63
WC-BART Area 16.5% | $2.54
WC-Downtown 11.5% | $2.36
WC-PH BART 20.9% | $2.40
Lamorinda 9.4% | $2.98
Vacancy Thematic: <10% 10% - 14.9% 15% - 19.9% 20% - 24.9% ≥25%
East Bay N. I-680 | Q1-2011 Q1-2012Inventory SF 16,826,924 16,826,924
Total Availabilities 2,972,475 2,637,603
Vacancy 17.67% 15.7%
Avg. Asking (NNN) $2.11 $2.08
4Q Trailing Net Abs. -468,500 334,872
Source: Cassidy Turley Research
San Ramon 14.3%% | $1.80
Dublin 15.9% | $1.73
Livermore 27.7% | $1.41
Pleasanton 19.8% | $1.77
Vacancy Thematic: <10% 10% - 14.9% 15% - 19.9% 20% - 24.9% ≥25%
Tri-Valley | Q1-2011 Q1-2012Inventory SF 22,034,339 22,034,339
Total Availabilities 4,030,554 3,676,547
Vacancy 18.3% 16.7%
Avg. Asking (NNN) $1.73 $1.89
4Q Trailing Net Abs. -71,075 354,007
Source: Cassidy Turley Research
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0%
5%
10%
15%
20%
$0
$1
$2
$3
$4
Vacancy Avg. Asking Rate (FS)
F O R E C A S TAnnual Growth
Historical & Forecast Vacancy & Rents
Greater East Bay Office
Net 1.6MRent 5%
Net 700KRent 10%
Net 300KRent 10%
Source: Cassidy Turley ResearchIncludes Alameda & Contra Costa Counties
Bay Area Industrial MarketVacancy Rate Trend
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120%
2%
4%
6%
8%
10%
12%
1.9%
10.4%
4.0%
9.8%
8.7%
1.7%
7.1%
4.4%7.5%
Warehouse Manufacturing
Source: Cassidy Turley Research
Bay Area Market
Changes Ahead
Bay Area Market
Changes Ahead Recovery? Absolutely…
Tech growth remains aggressive with office and R&D the beneficiariesGeography remains limited to 101 Corridor, but is expanding in South Bay
Stagnation? Yes, for some, but probably not for long… Both warehouse and manufacturing remain in flat to near-flat growth mode
- East Bay industrial still struggling to compete with Stockton price points
Office and R&D product away from tech influence remains mostly flat- Outlying markets generally weakest for job growth and office demand