Kidder Mathews Q3 Peninsula Industrial Report

We’ve seen a dramatic increase in the past quarter for owner/user purchases while leasing has been steady, but not crazy.  This mostly due to the fact that there is very little product on the market for lease.  Here’s the summary for the quarter:

The San Francisco Peninsula saw 124,038 square feet of negative net absorption this quarter, and 257,299 square feet of gross absorption. The market continues to stay productive with deals of all sizes completed throughout the Peninsula industrial market in the third quarter of 2014. San Mateo County experienced minimal occupancy losses as well which is not due to a lack of demand on the Peninsula, but rather a shortage of quality available space.

Read entire report here:  industrial-market-research-peninsula-2014-3q

Kidder Mathews Q3 San Francisco Office Report

San Francisco office is on fire and there doesn’t seem to be much holding it back from getting hotter.  Silicon Valley seems to be moving north into downtown as young tech employees want to take advantage of city living, meaning that more companies are looking to move into the city and gobble up more office and creative spaces.  Here’s an excerpt from the report:

San Francisco remains the hottest city in the nation for commercial real estate, with office rental rates surpassing dot-com era prices this quarter. No slowdown is in sight for the near future, as rapidly growing technology companies continue to expand throughout San Francisco. Leasing activity is already at record levels, and San Francisco is on pace to finish the year with over ten million square feet of gross absorption. With tenant demand exceeding the nearly four million square feet of office space currently under construction, competition is high. Investment sales activity is increasing as well, as buyers hope to see how high this peak will rise, and are willing to buy at lower cap rates to take advantage of this upswing.

Read entire report here:  office-market-research-san-francisco-2014-3q

Investor Purchases San Carlos Industrial Portfolio for $14.1M

Address: 360-380 Industrial Road, San Carlos, CA

Seller:   Tanklage Family Partnership

Buyer:   High net worth investor

RBA SF: 85,135 SF (Between 3 buildings)

Lot size:  5 AC

Selling price: $14,100,000 ($165.62/SF )

Type:   Industrial-Warehouse

This was a value-add/redevelopment play on a property that is located directly across the street from the new Palo Alto Medical Foundation clinic.

Yelp Signs 102K Lease at 55 Hawthorne Street, San Francisco

Comparable details:

Address:  55 Hawthorne St, San Francisco, CA

Landlord:  Harvest Properties and Invesco RE

Tenant:  Yelp

SF Leased:  102,000 (approx.)

Pricing:  $call

Type:  Class A Office

Term:  120 Months

The total building is 138K in which Yelp has the opportunity to expand into the entire building during the initial lease term. The building was developed in 1970 and is one block from the Second Street Technology Center and a few blocks from the expansive Transbay Project, the largest development currently under construction in the United States.

Industrial Cap Rates Continue to Decline

By Carrie Rossenfeld

The industrial sector nationwide is seeing declining vacancy rates and increased development, which has caused cap rates to drop since the beginning of the year, Bill Hankowsky, chairman, president and CEO of Liberty Property Trust in Malvern, PA, tells GlobeSt.com. Hankowsky will be speaking on the industrial development panel during NAIOP’s Development ’14 conference here later this month, and we spoke with him about the trends he is noticing in this realm.

“There are a handful of trends that everybody is focusing on,” says Hankowsky. “One is simply that the fundamentals of industrial space are solid and remain so. There’s a good demand for industrial space, absorption remains positive each quarter, vacancy is down nationally and rents are going up nationally.”

The second trend Hankowsky mentions is that development in the industrial arena is rising. “People need new, functional, state-of-the-art space in the size and configuration that they want it. Development is back apace across almost every market, which is both a ‘glass is half empty’ and ‘glass is half full’ situation: developers are glad to be back in the business of developing, and a number of us feel it is disciplined development, but contrarians are nervous that there will be too much development and it will undercut market strength and sector growth.”

The third trend he notes is the issue of declining cap rates, which has to deal with how in-demand this sector has become. “The fact that industrial is a very highly sought-after after class is stimulating lots of capital to the space. Cap rates are lower today than they were at the beginning of the year.”

E-commerce is another obviously huge trend, which is creating a new source of demand, says Hankowsky. “There are different logistic networks for various companies. In some cases, buildings are being constructed closer inside the metros, and there is constant thinking by our customer base about how to better store, handle and distribute their product.”

Read more of GlobeSt article here.

The Prado Group Takes Down the Fog Building in SF for $209/psf

Address: 333 Valencia Street, San Francisco, CA

Seller:   John Foggy

Buyer:   The Prado Group

RBA SF: 54,000 SF building

Lot size:  0.40 AC (17,498 SF)

Selling price: $11,300,000 ($209.26/SF )

Type:   Office

333 Valencia Street is a 4-story office building with ground floor retail and is known as the Fog Building.

Shorenstein Closes on Champion Station Buy

Shorenstein Properties LLC has closed on its purchase of the first phase of Champion Station, a four-building, low-rise office and R&D campus at 110-180 West Tasman Dr. in North San Jose. Terms of the purchase, which was concluded with TMG Partners, were not disclosed.

The four buildings, totaling 426,000 square feet, are currently fully leased to Champion Station on a short-term basis. “This is an opportunity to reposition a well-located campus in a market with strong leasing demand and a dearth of available blocks of office space to accommodate large users,” says Douglas W. Shorenstein, CEO and chairman, Shorenstein Properties LLC.

Mike Seifer, managing director of JLL, who represented the seller, tells GlobeSt.com that “There was broad investor interest in this opportunity and tenant activity in the immediate area continues to escalate.  This really demonstrates the continued improvement, maturation and importance of the north San Jose submarket and how this market has been transformed by the entertainment (Levi Stadium), retail and housing development that has occurred in the neighborhood.”

Champion Station is located in North San Jose, in an area that has seen significant ongoing capital investment by both public and private investors. The property is approximately 1.5 miles from Levi’s Stadium, the recently opened home of the San Francisco 49ers, as well as extensive retail and restaurant amenities.

Two major mixed-use developments, totaling more than $7 billion, have been proposed nearby and at least one of those developments is anticipated to begin construction in 2016, according to a prepared statement.

Read entire GlobeSt article here.

ViewRay Inks Mountain View R&D Lease Deal

Comparable details:

Address:  815 E. Middlefield Road, Mountain View, CA

Landlord:  Boston Properties

Tenant:  ViewRay

SF Leased:  25,518

Pricing:  $2.85 /psf NNN

Type:  R&D

Term:  62 Months

Kidder Mathews represented the tenant.

Office, Industrial Markets in U.S. Strengthen in Q3

By Michael Gerrity

According to data from CBRE Group, office vacancy rates declined in most major U.S. markets during Q3 2014. Twelve out of 13 major metro office markets saw vacancy fall and 11 markets saw average asking rents increase as tenants’ appetite for space continues to grow.

“Office space demand is expected to remain strong with continued improvement in the U.S. economy and steady expansion in office-using employment. Demand growth, coupled with the subdued national development cycle, bodes well for vacancy declines and sturdy rent growth,” said Sara Rutledge, Director of Research and Analysis, CBRE.

The U.S. industrial market also had healthy activity in Q3 2014, according to CBRE, with availability declining in 10 of the 12 major markets. Third-party logistics firms continued to expand nationally, with many markets reporting robust demand driven by that sector.

“The U.S. economy continues to expand, with employment rising and exports growing faster than expected. Q3 is predicted to be a strong quarter. This will help drive industrial space demand nationally,” said Jared Sullivan, CBRE Senior Economist.

U.S. Office Data:

Denver, which has seen steady demand from energy and business services firms, led the way in vacancy declines, with a vacancy rate drop of 80 basis points (bps) during Q3 2014. Despite this, asking rents slipped over the quarter as occupancies were taken in high-quality space, which has yet to be replenished with new deliveries.

  • New York saw its vacancy rate drop 60 basis points.
  • Atlanta, Dallas/Ft. Worth and Seattle all posted 50 basis points declines in Q3 2014.
  • Washington, D.C. was the lone market with flat vacancy over the quarter, holding at 15.2 percent since Q2 2014.
  • Boston posted the strongest quarterly average asking rent growth, at 4.0 percent on a dearth of availability in quality space and continued strong demand from tech and life sciences firms. San Francisco was second, with 3.3 percent growth in Q3 2014.
  • Office development remains subdued nationally, but many of the strongest markets are seeing increased pipeline activity. Houston continues to lead the pack, with 17.3 million sq. ft. underway to-date in Q3 2014.

Q3-2014-Preliminary-Office-Stats.jpg

U.S. Industrial Data:
The Texas markets posted the largest quarter-over-quarter availability rate decreases, with Dallas/Ft. Worth and Houston down 50 bps and 40 bps, respectively. Dallas/Ft. Worth benefited from expanding logistics companies, which are taking advantage of the strong local infrastructure, while Houston continued to ride the expanding energy boom occurring throughout the nation.

  • Although rents still remain below prerecession levels in most markets, rents increased in nine of the 12 major markets during Q3 2014, a reflection of improving market fundamentals.

Read entire World Property Channel article here.

Los Altos-based Box Takes Down New Crossing 900 Project in Downtown Redwood City

Comparable details:
Address:  900 Middlefield Road, Redwood City, CA

Landlord:  Kilroy Realty Corp/Hunter Storm LLC (joint venture)

Tenant:  Box.com

SF Leased:  334,000

Pricing:  $4.40 /psf NNN (est.)

Type:  Class A Office

Term:  144 Months

Box will take over the two-building complex in phases, occupying the first 226,000 square foot building in the third quarter of 2015 and the second 108,000 square foot building in early 2017.

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