State of the Union -Part II
A week ago we posted about the swirling storm surrounding the debt ceiling debate, loss of bank liquidity, and how it would affect the commercial market. Although this could have an overall impact on commercial pricing in the near to mid term, there are commercial sectors that seem to be bucking the overall trend, such as Class A Office and Multi-family. Yet there’s another bright light in industrial that has been hard to dim, especially when you consider the larger distribution sites.
Lately there have been large transactions occurring from the likes of Sobrato, Orchard Properties, Prologis and other institutional investors with some silly money being thrown around. Although market fundamentals seem to be on shaky ground with manufacturing reports showing dismal or stagnant growth, industrial rates have been surprisingly resilient posting 4 straight quarters of growth through Q1 of this year, which seems to be prompting the movement. Positive net absorption coupled with stabilized rents have created a tightening market and it seems the larger players are looking to pull the cart if steady growth and absorption continues.
Our team has seen an increase in sales and leasing volume with particular pressure being applied to freight forwarders. As South San Francisco puts the zoning squeeze on the carriers, it’s becoming harder to find quality freight buildings as those slowly move toward business service and biotech spaces. The decrease in overall distribution square footage may artificially put pressure on these properties.
Smaller spaces are also starting to see some movement especially properties zoned with auto and freight use. These are seeing positive growth due to the amount of available product on the market, which isn’t much. With SBA rates at historic lows, small businesses are investing in themselves and slowly absorbing product.
Overall the future of industrial real estate on the Peninsula seems to be steadily growing despite the economy’s best efforts. The San Francisco Bay Area will continue to lead the pack nationwide in rates and price per square foot, but there is no guarantee that prices could once again fall if fears of a double dip recession are realized and manufacturing and distribution contract.
The Peninsula Industrial Pros 