From The CoStar Industrial Report – First Quarter 2014 – San Francisco Industrial Market
source: www.costar.com
The San Francisco Industrial market ended the first quarter 2014 with a vacancy rate of 5.8%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 108,263 square feet in the first quarter. Vacant sublease space increased in the quarter, ending the quarter at 240,425 square feet. Rental rates ended the first quarter at $14.46, an increase over the previous quarter. There were no properties under construction at the end of the quarter.
Absorption
Net absorption for the overall San Francisco Industrial market was positive 108,263 square feet in the first quarter 2014. That compares to positive 542,155 square feet in the fourth quarter 2013, positive 197,735 square feet in the third quarter 2013, and positive 538,685 square feet in the second quarter 2013.
The Flex building market recorded net absorption of positive 952 square feet in the first quarter 2014, compared to positive 119,671 square feet in the fourth quarter 2013, positive 285,841 in the third quarter 2013, and positive 121,298 in the second quarter 2013.
The Warehouse building market recorded net absorption of positive 107,311 square feet in the first quarter 2014 compared to positive 422,484 square feet in the fourth quarter 2013, negative (88,106) in the third quarter 2013, and positive 417,387 in the second quarter 2013.
Vacancy
The Industrial vacancy rate in the San Francisco market area decreased to 5.8% at the end of the first quarter 2014. The vacancy rate was 6.0% at the end of the fourth quarter 2013, 6.6% at the end of the third quarter 2013, and 6.9% at the end of the second quarter 2013.
Flex projects remained at a vacancy rate of 9.2% at the end of the first quarter 2014 compared to the previous quarter, and9.7% at the end of the third quarter 2013, and 11.1% at the end of the second quarter 2013.
Warehouse projects reported a vacancy rate of 4.7% at the end of the first quarter 2014, 5.0% at the end of fourth quarter 2013, 5.6% at the end of the third quarter 2013, and 5.5% at the end of the second quarter 2013.
Sublease Vacancy
The amount of vacant sublease space in the San Francisco market increased to 240,425 square feet by the end of the first quarter 2014, from 147,837 square feet at the end of the fourth quarter 2013. There was 222,073 square feet vacant at the end of the third quarter 2013 and 172,968 square feet at the end of the second quarter 2013
San Francisco’s Flex projects reported vacant sublease space of 135,533 square feet at the end of first quarter 2014, up from the 129,587 square feet reported at the end of the fourth quarter 2013. There were 136,326 square feet of sublease space vacant at the end of the third quarter 2013, and 142,503 square feet at the end of the second quarter 2013.
Warehouse projects reported increased vacant sublease space from the fourth quarter 2013 to the first quarter 2014. Sublease vacancy went from 18,250 square feet to 104,892 square feet during that time. There was 85,747 square feet at the end of the third quarter 2013, and 30,465 square feet at the end of the second quarter 2013.
Rental Rates
The average quoted asking rental rate for available Industrial space was $14.46 per square foot per year at the end of the first quarter 2014 in the San Francisco market area. This represented a 0.3% increase in quoted rental rates from the end of the fourth quarter 2013, when rents were reported at $14.42 per square foot.
The average quoted rate within the Flex sector was $23.01 per square foot at the end of the first quarter 2014, while Warehouse rates stood at $10.86. At the end of the fourth quarter 2013, Flex rates were $22.75 per square foot, and Warehouse rates were $10.87.
Deliveries and Construction
During the first quarter 2014, no new space was completed in the San Francisco market area. This compares to one building totaling 36,000 square feet that was completed in the fourth quarter 2013, nothing completed in the third quarter 2013, and 189,000 square feet in one building completed in the second quarter 2013.
There was no Industrial space under construction at the end of the first quarter 2014.
Inventory
Total Industrial inventory in the San Francisco market area amounted to 94,885,548 square feet in 4,857 buildings as of the end of the first quarter 2014. The Flex sector consisted of 23,355,194 square feet in 783 projects. The Warehouse sector consisted of 71,530,354 square feet in 4,074 buildings. Within the Industrial market there were 491 owner-occupied buildings accounting for 12,246,466 square feet of Industrial space.
Sales Activity
Tallying industrial building sales of 15,000 square feet or larger, San Francisco industrial sales figures rose during the fourth quarter 2013 in terms of dollar volume compared to the third quarter of 2013.
In the fourth quarter, 11 industrial transactions closed with a total volume of $76,215,000. The 11 buildings totaled 460,604 square feet and the average price per square foot equated to$165.47 per square foot. That compares to five transactions totaling $20,112,500 in the third quarter. The total square footage was 125,936 for an average price per square foot of $159.70.
Total year-to-date industrial building sales activity in 2013 is down compared to the previous year. In the twelve months of 2013, the market saw 30 industrial sales transactions with a total volume of $183,297,100. The price per square foot has averaged $166.30 this year. In the twelve months of 2012, the market posted 43 transactions with a total volume of $267,879,854. The price per square foot averaged $146.09.