Click here for the full report: Q3 2017 SF Market Report
Click here for the full report: Q3 2017 SF Market Report
Source: CoStar News
By: Bryce Meyers
Date Posted: November 8, 2017
With the highly anticipated decision on the selection of its second headquarters pending, Seattle-based online electronic commerce and cloud computing company Amazon (NYSE: AMZN) in the meantime is continuing to invest heavily in its fulfillment center infrastructure, this time disclosing plans to develop a new 855,000-square-foot fulfillment center roughly 15 miles southeast of Baltimore in Sparrows Point, MD.
The fourth Amazon facility to be developed in the state of Maryland, the Sparrows Point complex will be developed at 1700 Sparrows Point Blvd. within the Tradepoint Atlantic park, a 3,100-acre intermodal redevelopment site formerly home to Bethlehem Steel and acquired by Tradepoint Atlantic, then known as Sparrows Point Terminal, in 2014. The new facility is expected to bring an additional 1,500 full-time positions to Baltimore following its completion.
“We are very pleased to welcome Amazon as our newest tenant,” said Eric Gilbert, chief development officer for Tradepoint Atlantic. “Amazons decision to locate its 855,000-square-foot state-of-the-art fulfillment center at Tradepoint Atlantic serves as further validation of the unique logistical advantages we offer and further establishes our location as a top destination for users seeking a best-in-class multi-modal logistics platform.”
From 2014 to 2016, Amazon has added $100 million to Maryland’s economy with the development of two fulfillment centers and one sortation center that has resulted in the creation of more than 4,000 full-time employees in the greater Baltimore area and 5,000 employees statewide.
This year alone, Amazon has pledged to develop new fulfillment centers in the Atlanta, Cincinnati, Cleveland, Denver, Detroit, Staten Island, Houston, New Haven, CT, Portland, Salt Lake City, Staten Island and Washington, D.C. markets, in addition to Baltimore.
Link to article: Amazon-Baltimore
Low vacancy rates coupled with limited new construction (or new projects hitting the market pre-leased), the San Francisco market will remain restricted for the foreseeable future. However, “despite the challenging rents and diminishing availability, tech will remain a stronghold in San Francisco.” San Francisco has become synonymous with tech, and for now San Francisco is still the place to be for giants and start-ups alike.
Source: CoStar News
By: Randly Drummer
Date Posted: September 21, 2017
The commercial real estate industry’s chief lobbying group Tuesday urged lawmakers to take a measured approach in deciding on changes to how commercial property and other corporate assets are taxed, cautioning that the elimination of the deduction for interest on debt and reducing the tax rate for pass-through business income could cause severe damage to the U.S. economy.
While supporting a broad acceleration of economic growth through tax reform that would boost real estate construction and development and spur job creation, Congress “should be wary of changes that result in short-term, artificial stimulus and a burst of real estate investment that is ultimately unsustainable and counterproductive,” Real Estate Roundtable President and Chief Executive Officer Jeffrey DeBoer said in testimony before the Senate Finance Committee.
“Real estate investment should be demand-driven, not tax-driven,” DeBoer said. “In short we should avoid policies that create a sugar high that is fleeting and potentially damaging to our future economic health.”
Meanwhile, the Senate Finance Committee focused on business interest deductibility and other corporate tax issues in what could provide a clue to what measures will be included in a tax-reform outline that Republican tax writers plan to release next week.
DeBoer and others, including Troy Lewis, the immediate past chair of the tax executive committee of the American Institute of Certified Public Accountants, warned that scrapping the deduction would increase the cost of capital, disrupt credit markets, hurt small businesses that lack access to equities markets and discourage investment in commercial development and other business activities.
DeBoer noted that interest on the cost of borrowing is an ordinary and necessary business expense that has always been deductible. PLacing restrictions on capital markets would discourage business expansion, he asserted, and said the impact would fall disproportionately on developers and other entrepreneurs in small and medium-sized markets.
“As interest rates rise, the harm to the economy will grow,” DeBoer said.
While shortening real estate depreciation from the current 30 years to 20 years would spur investment, DeBoer also warned that a proposal to allow full expensing of depreciation is “a risky and untested proposal.”
Tax experts such as Scott Hodge, president the Washington, D.C.-based Tax Foundation; and Donald Marron of the Urban Institute and Urban-Brookings Tax Police Center, said reform of the corporate tax code, including cutting corporate tax rates from 35% to 20%, would provide a dramatic boost to the economy.
Marron cautioned, however, that adding to the federal deficit in order to cut corporate taxes would likely offset the economic benefits.
“Policymakers should be realistic about near-term growth from business tax reform,” Marron said. “The growth effects of more and better investment accrue gradually. If reform is revenue-neutral, revenue raisers may temper future growth. If reform loses revenue, tax cuts mixed with reform, deficits may crowd out private investment.”
Link to article: CRE Tax Code
In a partnership with Build Inc., the San Francisco Recreation & Parks Department (RPD) plan on redeveloping over 38 acres of land in the India Basin area of San Francisco into a mixed-use project consisting of retail, commercial, residential and open spaces.
According the Draft Environmental Impact Report (EIR) released on September 13, 2017 (EIR-1 and EIR-2), two iterations of the project are being considered: “(1) a residentially-oriented project with approximately 1,240 dwelling units, 275,330 square feet of commercial space, 50,000 square feet of institutional space, and 1,800 parking spaces; or (2) a commercially-oriented variant with approximately 500 dwelling units, 1,000,000 square feet of commercial space, 50,000 square feet of institutional space, and 1,932 parking spaces.”
The Draft EIR public comment period now open through October 30, 2017 with a public hearing date scheduled for October 19, 2017.
Amazon today is posting another unique offering you can bid for online: a new headquarters site in North America.
The company is seeking sites in major North American cities for a “full equal” to its Seattle headquarters, dubbed Amazon HQ2. The online retailer expects to invest over $5 billion to build and operate its new co-headquarters, which it said could include as many as 50,000 high-paying jobs.
In addition, Amazon HQ2 is expected to create tens of thousands of additional jobs and tens of billions of dollars in additional investment in the surrounding community.
Amazon estimates its investments in Seattle from 2010 through 2016 resulted in an additional $38 billion to the city’s economy, providing data that showed every dollar invested by Amazon in Seattle has generated an additional 1.4 dollars for the city’s economy overall.
Real estate owners and state and local government leaders interested in learning more about how they can bring Amazon to their community can visit AmazonHQ2.
“Amazon HQ2 will bring billions of dollars in up-front and ongoing investments, and tens of thousands of high-paying jobs,” said Jeff Bezos, Amazon founder and CEO, in announcing the new headquarters search. “We’re excited to find a second home.”
Amazon listed the following criteria for choosing the location for HQ2:
Metropolitan areas with more than 1 million people;
A stable and business-friendly environment;
Urban or suburban locations with the potential to attract and retain strong technical talent; and
Communities that think big and creatively when considering locations and real estate options.
Amazon said the new location could be, but does not have to be, an urban or downtown campus with a similar layout to Amazon’s Seattle campus and a fully entitled, development-prepped site.
“We want to encourage states and communities to think creatively for viable real estate options, while not negatively affecting our preferred timeline,” the company said in its announcement.
Amazon expects to hire new teams and executives in HQ2, and said it plans to allow existing senior leaders across the company to decide whether to locate their teams in HQ1, HQ2 or both. The company expects that employees who are currently working in the Seattle HQ can choose to continue working there, or they could have an opportunity to move to HQ2.
Amazon has been experiencing exponential growth and announced earlier this year hiring projections of adding more than 100,000 new, full-time jobs through next June. And, it has been expanding in markets across the country. The following is a list of major expansions undertaken just this year.
-Amazon Expansion Move – Date
-Opens search for Amazon HQ2 – A second headquarter city in North America — September-2017
-Announces first fulfilment center in New York, creating 2,250 full-time jobs — September-2017
-Expands in Oregon with Salem fulfilment center — August-2017
-Announces plans for new fulfilment center in Ohio — August-2017
-Completes acquisition of Whole Foods Market — August-2017
-Announces new fulfilment center in Romulus, OH — July-2017
-Opens new fulfilment center in Orlando — July-2017
-Announces plans for Salt Lake City fulfilment center — July-2017
-Announces new fulfilment center in Thornton, CO — June-2017
-Announces new fulfilment center in North Haven, CT — June-2017
-Announces plans to open first Oregon fulfilment center in Troutdale — June-2017
-Announces plans to expand in Miami with new fulfilment center — June-2017
-Announces fulfilment center to open in Fresno, CA — June-2017
-Announces new fulfilment center in Georgia — June-2017
-Announces plans to open three additional New Jersey fulfilment centers — April-2017
-Announces second Houston-area fulfilment center — March-2017
-Announces new fulfilment center in Virginia — March-2017
-Announces two new California fulfilment centers — February-2017
-Announces new air cargo hub in Kentucky — January-2017
-Announces first fulfilment center in Colorado — January-2017
-Amazon announces ninth fulfilment center in Texas; new robotics site — January-2017
-Announces new fulfilment center in Maryland — January-2017
-Confirms second Jacksonville fulfilment center — January-2017
Details of Amazon’s Current Seattle Headquarters
-Number of buildings — 33
-Square feet — 8.1 million
-Local retail within Amazon headquarters — 24 restaurants/cafes + 8 other services
-Amazon employees — 40,000+
-Capital investment (buildings & infrastructure) — $3.7 billion
-Operational expenditures (utilities & maintenance) — $1.4 billion
-Compensation to employees — $25.7 billion
-Number of annual hotel nights by visiting Amazonians and guests — 233,000 (2016)
-Amount paid into the city’s public transportation system as employees’ transportation benefit — $43 million
Source: CoStar News
Author: Mark Heschmeyer
Link to article: AMAZON
By: Chuck Sudo
Date Posted: August 25, 2017
Industrial real estate is in a golden age of low vacancies and cap rates, record demand and a packed pipeline across the country. E-commerce remains the biggest disruptor in the sector, providing opportunities for developers and investors as well as new headaches.
Read more at: https://www.bisnow.com/national/news/industrial/amazon-is-the-best-thing-to-happen-to-industrial-real-estate-in-years-and-the-sectors-biggest-disruptor-78236?rt=46489&utm_source=MorningBrief&utm_medium=email&utm_campaign=20170828_san-francisco_morningbrief&be=sarah%40calcosf.com?utm_source=CopyShare&utm_medium=Browser
Source: CoStar News
By: Randyl Drummer
Date Posted: July 20, 2017
Investors continued to buy less commercial real estate in both the second quarter and the first half of 2017 compared to the same periods a year ago, a trend that started in 2016 as steady fundamentals that have resulted in generally robust occupancies and rental rate gains have boosted valuations across most property types.
However, CRE investment sales are still running about 10% above the historical sales volume average over the past 10 years, according to preliminary U.S. investment sales data collected by CoStar’s nationwide research team. In the second quarter, preliminary volume fell to $106.7 billion compared with $129.2 billion in second-quarter 2016.
The lodging property sector saw the biggest decline in the first half of the year compared with hotel property sales in the same period in 2016, including a significant drop in the second quarter from year-prior totals. Retail and multifamily also post sales volume declines of more than 20% in the first six-month period of 2017.
The drop-off in U.S. apartment transaction volume from previous peak levels is consistent with slowing rent growth and the market’s perception of oversupply, particularly at the top of the multifamily market, noted CoStar research strategist John Affleck.
That being said, even as buyers and sellers have continued to benefit from low interest rates, which supported the trading volume among all types of commercial property that resulted in the record-shattering pace of the last two years. With interest rate beginning to trend upward, the low-financing advantage enjoyed by property investors is expected to gradually diminish in coming quarters.
“Higher interest rates have investors reevaluating commercial real estate’s core appeal this cycle: a wide spread in a low-yield world,” Affleck added. “The maturity of the economic cycle and the new administration also raise uncertainty.”
While industrial sales volume declined by double digits in the second quarter, the warehouse and light industrial market ended the first half of this year with the smallest decline among the major property types.
Conversely, office sales volume was roughly even in the second quarter of 2017 compared with the same period a year earlier, and was down only slightly in the first half compared to the first two quarters of last year and down by an even lower percentage for the trailing four-quarter period ending June 30, 2017.
Despite the modest declines in the sales volumes, “indications from our clients, especially lenders, are that the pipeline for 2017 is very strong for the remaining part of the year,” said Walter Page, CoStar director of U.S. Research, office.
Page also noted that office sales over the past year don’t factor in an additional $30 billion in new office real estate expected to deliver in 2017 due to the 90 million square feet of expected office deliveries within the top 54 U.S. metros.
“While the sales data is tracking property sales, the true level of capital transactions would count new construction as well,” Page added.
U.S. office fundamentals are tracking at a steady and balanced clip, with average vacancy holding at about an average 10.2% for each of the last four quarters, Page noted.
“The last time we had four quarters in a row with the same vacancy rate was back in 2003 and 2004, when vacancy was 12.5%,” Page said, adding that CoStar’s forecast calls for vacancy to remain in the 10.2% to 10.5% range until 2019 as delivery of new office supply is expected to track with demand and net absorption.
The preliminary data shows both suburban and CBD office properties logged increases in the average price per square foot between the first and second quarters of 2017, according to CoStar Vice President of Research Dean Violagis.
Industrial: E-Commerce Continues to Drive Warehouse Demand
Likewise, the U.S. logistics and light-industrial property market remains in healthy balance, with more than $33 billion in U.S. industrial sales recorded in the first half, down only slightly from the same period in 2016.
“Investor appetite remains strong for industrial properties in large part because of the compelling e-commerce demand story,” noted CoStar Portfolio Strategy Managing Consultant Shaw Lupton. “With industrial construction in balance with supply, rent growth remains uncharacteristically the highest of any property sector.”
Logistics occupancies have seen little change over the past few quarters, ending the second quarter of 2017 at 93.4% as second-quarter absorption totaled a strong 42.8 million square feet, driving the 12-month trailing average to 182.3 million square feet.
Strong interest from the capital markets should keep industrial yields low, even in the face of rising interest rates, Lupton concluded.
Retail: Store Closures Affecting Investor Appeal
The ongoing spate of store closure announcements this year have had a measurable impact on the liquidity of U.S. retail properties, with investment volume decreasing by significant percentages in the second quarter and first half of 2017 compared to the same period a year earlier, according to CoStar Portfolio Strategy managing consultant Ryan McCullough.
The retail market posted its second straight quarter of flat fundamentals in the second quarter, with vacancies holding at 5.2%. Demand has lagged behind supply growth since the start of the year as the market officially transitions to a “late expansion” phase in the real estate cycle, lowering rent growth expectations for landlords, McCullough said.
However, the announced closures by dozens of national chains, including Sears, Kmart, Macy’s, JC Penney, RadioShack, Payless ShoeSource and most recently, Gymboree, have not had a similar effect on pricing, McCullough noted.
Retail property pricing has increased by 8.5% over the past four quarters, according to the equal-weighted CoStar Commercial Repeat Sale Index (CCRSI).
“This divergence is perhaps an indication that investors taking a more critical eye toward asset quality, being more selective about acquisition targets but still valuing performing assets highly,” McCullough said.
Both composite indices within the CoStar Commercial Repeat-Sale Index (CCRSI) posted gains in May, even as slower growth at the top end of the CRE market continued while overall absorption moderated and transaction volume continued to trend downward.
The equal-weighted U.S. Composite Index, which reflects more numerous but lower-priced property sales typical of secondary and tertiary markets, increased 1.3% in May, contributing to an annual gain of 16.7% in the 12-month period ending in May 2017.
Meanwhile, the value-weighted U.S. Composite Index, which reflects the larger asset sales common in core markets, advanced by just 0.3% in May, for a total 4.8% gain for the 12-month period ending in May.
Link to article: 2017 Sales Volume
By: Julie Littman
Date Posted: July 17, 2017
According to Bisnow, BioMed Realty will be constructing approximately 1.5 Million square feet of life science offices in South San Francisco.
With R&D office vacancy rates at historical lows on the Peninsula, developers are working hard to meet the demand–which often includes open office layouts, and “amenity-rich” campuses with fitness centers, on-site cafes, etc. As drug approvals move forward, the BioTech industry is projected to continue its “boom” with developers and Owners vying to take advantage of the sharp increases in rents.