industrial real estate news san francisco

Category: industrial real estate news san francisco (39)

Jun

Bay Area Real Estate News: East Bay Office Rents Surge/Tech Stays In SF

Why Office Rents are Surging in these East Bay Cities
Source: San Francisco Business Times
Reporter: Roland Li
Date Posted: June 30, 2015

Rents are rising in the East Bay office submarket along the northern I-680 highway corridor as local companies expand, despite still-high vacancy rates and limited migration from companies outside the area, according to brokerage Newmark Cornish & Carey.

The submarket, which includes Concord, Walnut Creek and Pleasant Hill, has seen rents increase in some areas by as much as 30 percent, said Tom Fehr, executive vice president and regional manager of Newmark Cornish & Carey. Rents range from $48 per square foot in Class A space in Walnut Creek near the BART station to $24 per square foot in less desirable space in Concord, he said.

The vacancy rate in the submarket of roughly 10 million square feet remains high at 15.3 percent, but it is down from 16.7 percent at the beginning of the year, according to Newmark Cornish & Carey data. Concord has improved to 17.8 percent vacancy, from 20.4 percent at the start of the year.

“What is driving it is organic growth within our market,” said Fehr. “These tenants are not, for the most part, tech companies. The tech companies are staying in San Francisco.”

The northern I-680 submarket is still rebounding from the 2008 recession, when a swath of businesses related to home buying closed, including mortgage bankers, insurers and homebuilders. “We got hit pretty hard. Our recovery’s been much slower,” said Fehr.

Part of the market’s appeal is its proximity to more affordable housing in the East Bay. Workers also typically encounter lighter traffic when driving northeast, in contrast to crossing the Bay Bridge into San Francisco, said Fehr.

Newmark is now fielding more inquiries on space from companies considering a relocation from Oakland or San Francisco. “We’ve been waiting for the spillover to happen probably since the second quarter of 2013,” said Fehr.

Rents aren’t near the $60 per square foot that would justify new construction of office space, and the vacancy rate in the area further discourages any new construction. But if the submarket is able to continue the current momentum to lure more tenants, the area may see its biggest recovery since the recession.

“It’s the first time since 2010 that we’ve had a really dynamic six-month period,” said Fehr.

Link to Article: EAST BAY OFFICE RENTS

Jun

San Francisco Commercial Real Estate News: Office Sublease Availability Hits Five-Year High

Don’t Fret: 5 reasons San Francisco companies are dumping office space
Source: San Francisco Business Times
Reporter: Cory Weinberg
Date Posted: June 8, 2015

The sizzling San Francisco office market may have gotten some cold water sprinkled on it, now that the amount of space for sublease has hit a five-year high. Some office market observers have said this could be a signal that the office market may be cooling off, possibly a leading indicator that technology companies are getting too ambitious with their space needs.

But real estate brokerages have sprung to the market’s defense, arguing that the sublease trend is a positive sign. Subleases loosen the market, which makes it healthier, and give startups in need of quick space the opportunity to stay in San Francisco, they say.

“Many landlords are unwilling to sign for less than seven years, so tech startups in particular are finding the sublease market to be a viable option,” a market report by the brokerage JLL said. JLL also pointed out sublease space is being gobbled up at a quick pace – staying on the market for just 94 days on average.

Cushman & Wakefield said there’s “no need to fret.” San Francisco has “nowhere near the amount of vacant sublease space recorded during the dot-com bust just after the turn of the century.”

And now CBRE has crunched numbers that detail why tech firms and non-tech firms are ditching their office space. Tech firms have put 450,000 square feet of space on the market, while non-tech firms have put 745,000 square feet.

The graphic at the bottom (click here for infograph: Graph) breaks down why companies have put up space. We’ll explain what they are:

Space banking

The biggest reason that tech firms have been subleasing is because they’re banking space. That accounts for about 135,000 square feet on the market. Square is one of the tech firms that fits into this trend. “Space banking means they’ve taken another space and would have already occupied it, but they took more than they needed,” said Colin Yasukochi, director of research for CBRE.

Outgrowing space

More than 100,000 square feet is on the market because a tech company has outgrown its space. The biggest example here? Salesforce, which is leasing out space in 1 California and 123 Mission as it grows into its new urban campus next to the future Transbay Transit Center.

Consolidation

About 100,000 square feet is on the market because tech firms have consolidated due to a merger or acquisition. That’s likely why the market has seen some real estate tech firms try to shed some space after Zillow acquired Trulia earlier this year.

Downsizing

About 17 percent of tech company sublease space and 22 percent of non-tech firm space is due to downsizing.
Exiting San Francisco

The bulk of non-tech firms that are trying to sublease space are moving jobs out of San Francisco. That’s why Charles Schwab is looking to shed 350,000 square feet of its space, though it’s maintained it will keep its headquarters present in San Francisco.

Link to article: SF Office Space

May

National CRE News: Commercial Real Estate Prices Continue Upward Surge in Q1 2015

Prices Indices Rise at Double-Digit Rates for all U.S. Regions, Major Property Types
Source: CoStar
by: Randyl Drummer
Date Posted: May 13, 2015

Amid some of the strongest investment sales on record, commercial real estate prices rose across both the high and the low ends of the market during the first three months of 2015 as strong capital flows and healthy fundamentals converged to support broad pricing gains.

The latest release of the CoStar Commercial Repeat Sale Indices (CCRSI), an analysis of commercial property sales through March 2015 that provides one of the broadest measures of repeat sales activity, reflected increases across virtually every segment of the real estate market during the first quarter of 2015.

The value-weighted U.S. Composite Index, influenced by sales of high-quality assets in core markets, increased by 4.7% in the first quarter of 2015 and is now 11% above its previous peak in 2007. The equal-weighted U.S. Composite Index, which weighs each transaction equally and reflects the impact from the more numerous smaller transactions, rose 4.8% in the first quarter, although its price recovery started later in the cycle and remains 10% below its previous peak.

The General Commercial segment of the CCRSI Composite Index, made up of smaller deals typical of second- and third-tier markets, gained by 5% in the first quarter of 2015 and 15.9% for the 12 months ending in March 2015, moving to within 11.3% of its previous peak as deals outside of the primary markets continued to attract more investor attention.

The investment grade segment of the Composite Index, which encompasses larger-sized, high-quality properties most often purchased by institutional investors, posted solid but more modest growth of 4.6% in the first quarter and 10.5% in the 12-month period, moving to within 6% of its prior peak.

As the CRE recovery spread across more markets and property segments, all regional sectors and building types posted double-digit annual gains in the 12 months through March 2015. The Multifamily Index has already fully recovered, eclipsing its previous peak, while the retail and industrial indices climbed to within 10% of their previous peaks. The Office Index remained 15% below its previous 2007 high mark.

Among CCRSI’s regional indices, strong investor demand in core coastal metros propelled the Northeast Composite Index to 6.1% above its prior peak during March, while the West Composite Index moved to within 8.4% of its prior high.

Property sales transaction activity, which reached a cyclical high last year, remained strong in the first quarter of 2015, typically the weakest quarter of the year for sales activity. Total sales pair investment volume of $27.8 billion in the first quarter was still more than 50% higher than in the same period last year, suggesting that capital flows will continue to be strong through 2015.

The low cost of debt has helped support the robust deal volume, with low interest rates helping keep wide spreads over the risk-free bond rate, despite historically low capitalization rates.

All six property type indices logged double-digit gains in the 12 months. The CCRSI prime industrial and apartment indices, measuring sales of the properties in the top metros in each sector, saw limited growth due to the run-up in pricing in many core markets. However, the prime office and retail indices grew faster than the overall market average during the same period.

Apartment investment led all building types in annual growth, with the Multifamily Index increasing by 14.8% for the 12 months ending in March. While strong investor appetite for 5- and 4-Star assets in primary markets has propelled the Prime Multifamily Metros Index to lead all repeat sale indices in the recovery and is now 27.6% above its previous 2007 peak, new supply entering the market is beginning to exert downward pressure on occupancies and rent growth. Consequently, the Prime Multifamily Metros index slowed to 10.3% for the 12 months ending in March 2015, compared with 24% for the same period a year earlier.

With new office construction in check and office job growth continuing to outstrip overall employment growth, prices for office properties increased 13.9% during the 12-month period ending March 30. The Prime Office Metros Index advanced by an even stronger 19% annually, with sales of larger core office properties that more resemble bonds in terms of value retention and appreciation enjoying strong pricing growth. Investors view such assets as reliable alternative investments with good relative value.

The U.S. Retail Index rose 43.5% from its recessionary low and 13.5% for the 12 months ending in the first quarter. Retail pricing is now just 6.8% below its previous peak — second only to multifamily among the four major property types. Pricing gains were strongest in top-tier trade areas within core coastal markets over the period, while late-recovery markets, especially fast-growing Sun Belt metros, offered the most price appreciation potential.

Industrial vacancy rates fell to lows not seen since before the last recession, while rent growth, usually unremarkable for industrial property, remained strong at over 5% annually for the 12 months. As a result, the Industrial Index advanced by a solid 12.4%. After a 5.1% increase over the last 12 months, the Prime Industrial Metros Index is still below last cycle’s peak, suggesting more runway for price appreciation as rents continue to escalate. These prime metros are expected to become increasingly competitive as new supply comes on line.

After relatively modest growth of just 4% in the prior period, the Hospitality Index surged by 20.6% in the 12-month period. U.S. hotel occupancies have reached their highest level since the mid-1990s, fueling growth in average room rates and revenue per available room (RevPAR).

Although the CCRSI Land Index gained 23.1% in the 12 months as developers bid up sites across all property sectors, the index has not yet reached its 2012 trough and is still in the earlier stages of its recovery. The Land Index remains 23.1% below its previous peak during the last cycle.

Link to article: CRE Prices Surge

Apr

National Commercial Real Estate News: Office Construction Picking Up Momentum

BY THE NUMBERS: U.S. Office Construction Picking Up Momentum
108 Million Square Feet Under Construction-Highest Total since 2009

Source: Costar
By: Randyl Drummer
Date Posted: April 29, 2015

After nearly five years of steady but relatively moderate increases, deliveries of newly constructed office space exceeded quarterly office demand nationally in the first quarter as office construction levels moved closer toward their long-term average across the country.

About 15 million square feet of office space was delivered to the U.S. market in the first quarter of 2015, for the first time in the current economic cycle eclipsing total net absorption of office space, which was just over 12 million square feet, according to CoStar office market data.

About 108 million square feet was under construction at the end of first-quarter 2015, up 17% from 92 million square feet in the same period a year ago, according to CoStar data. The level of national office construction has risen very slowly since hitting its long-term historical trough of less than 50 million square feet in late 2010, producing quarterly supply growth that was the moral equivalent of zero when factoring in demolitions of obsolete office space and other loss of inventory.

With higher office rents making new development a viable alternative to buying existing buildings, the amount of office space under construction is finally approaching its quarterly historical average of 122 million square feet, a level last attained in late 2008.

Construction levels are above their historic norm in about one-third of the largest U.S. metros, led by Northern California’s Silicon Valley, where Apple is building its 2.8 million-square-foot “spaceship” corporate campus in Cupertino; and Houston, where ExxonMobil is building its huge new corporate campus. Total space under construction amounts to 7% and about 6%, respectively, of those markets’ rentable inventory.

Other markets seeing an above-average construction bump are Seattle, Austin, San Francisco, Raleigh, Dallas-Fort Worth, Boston, Chicago and Denver.

Shift In Strategy for Developers

Along with the growing demand for new office space comes a shift in strategy for the nation’s largest owners and developers of office buildings, especially those with projects in the largest U.S. CBDs.

Rather than in acquiring buildings at rapidly appreciating prices in its core markets of Boston, San Francisco and Washington, D.C., Boston Properties (NYSE: BXP) is stepping up its strategy of re-investing capital it recycles from the sale of older buildings into new developments that yield higher returns.

“We are spending more time looking at new investments and development sites, or buildings requiring repositioning — both of which leverage our development and operating skill,” said Owen Thomas, Boston Properties chief executive officer, citing the company’s development pipeline of 11 office projects totaling 3.3 million square feet with a total projected cost of $2.1 billion.
Thomas told investors this week that BXP forecasts that these projects funded by cash on the balance sheet will generate a more than 7% cash net operating income yield over the next three years upon completion.

Rising office rents are driving the development boom in metros such as San Francisco, where Boston Property is building the 61-story, 1,070-foot-tall Salesforce Tower, formerly known as the Transbay Tower in the South of Market district. While rents in the Bay City have spiked 70% since the recession, however, two-thirds of the country is still not seeing the kind of rent growth that justifies large-scale new construction, including big metros such as Orange County, CA, Los Angeles and Atlanta.

Other metros seeing limited development or construction compared with history or are starting to cool down are Washington, D.C., Phoenix, San Diego and New York City.

Major project starts in the first quarter included the 1.7 million-square-foot campus fully leased to FMC Technologies in Houston. Also getting under way was the 610,000-square-foot Crosstown Concourse office project, a value-add redevelopment of the former Sears & Roebuck building pre-leased to St. Jude Children’s Research Hospital and other tenants.

Lincoln Property Co. has started 350 Bush Street, the first new office building in San Francisco’s Financial District in more than a decade. The speculative 433,000-square-foot project is driven by a tight 7.8% vacancy rate for top quality 4- and 5-Star buildings in the submarket.

In Phoenix’s Tempe submarket, Ryan Companies and Sunbelt Holdings have started 300 E. Rio Salado Parkway, a 480,000-square-foot building preleased to State Farm for a regional hub.

Office developers delivered 15 million square feet in the quarter, compared with 11 million square feet in the first quarter of 2014, and while completions will pick up slightly through the rest of the year, they will likely total between 65 and 70 million square feet, below the historical completion rate.

Notable first-quarter deliveries included the 1.5 million-square-foot second phase of ExxonMobil’s corporate campus in Houston; and 1K Fulton, a 689,067-square-foot building in the Chicago market that is now 39% occupied, according to CoStar information.

Link to article: US Office Construction

Apr

San Francisco Commercial Real Estate Market News: Q1 2015 Industrial Report

San Francisco’s Vacancy Decreases to 3.6%
Net Absorption Positive 218,378 SF in the Quarter
Source: CoStar

The San Francisco Industrial market ended the first quar- ter 2015 with a vacancy rate of 3.6%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 218,378 square feet in the first quarter. Vacant sublease space increased in the quarter, ending the quarter at 413,869 square feet. Rental rates ended the first quarter at $16.40, an increase over the previous quarter. A total of two buildings delivered to the market in the quarter totaling 108,080 square feet, with 252,593 square feet still under construction at the end of the quarter.

Absorption

Net absorption for the overall San Francisco Industrial market was positive 218,378 square feet in the first quarter 2015. That compares to positive 265,569 square feet in the fourth quarter 2014, negative (20,730) square feet in the third quarter 2014, and positive 958,846 square feet in the second quarter 2014.

Tenants moving out of large blocks of space in 2015 included U-Save Equipment & Tool Rental moving out of (21,000) square feet at 1258 Bayshore Blvd.

Tenants moving into large blocks of space in 2015 include: Green Leaf moving into 105,600 square feet at 455 Valley Dr, Myokardia moving into 45,404 square feet at 333 Allerton Ave, and CloudFlare moving into 43,519 square feet at 101 Townsend St.

The Flex building market recorded net absorption of posi- tive 3,656 square feet in the first quarter 2015, compared to positive 129,751 square feet in the fourth quarter 2014, positive140,779 in the third quarter 2014, and positive 276,608 in the second quarter 2014.

The Warehouse building market recorded net absorp- tion of positive 214,722 square feet in the first quarter 2015 compared to positive 135,818 square feet in the fourth quarter 2014, negative (161,509) in the third quarter 2014, and positive 682,238 in the second quarter 2014.

Vacancy

The Industrial vacancy rate in the San Francisco market area decreased to 3.6% at the end of the first quarter 2015. The vacancy rate was 3.8% at the end of the fourth quarter 2014, 4.0% at the end of the third quarter 2014, and 4.1% at the end of the second quarter 2014.

Flex projects remained at a vacancy rate of 5.3% at the end of the first quarter 2015 compared to the previous quarter, 5.8% at the end of the third quarter 2014, and 6.4% at the end of the second quarter 2014.

Warehouse projects reported a vacancy rate of 3.1% at the end of the first quarter 2015, 3.3% at the end of fourth quarter 2014, 3.4% at the end of the third quarter 2014, and 3.3% at the end of the second quarter 2014.

Sublease Vacancy

The amount of vacant sublease space in the San Francisco market increased to 413,869 square feet by the end of the first quarter 2015, from 285,144 square feet at the end of the fourth quarter 2014. There was 290,380 square feet vacant at the end of the third quarter 2014 and 314,753 square feet at the end of the second quarter 2014.

San Francisco’s Flex projects reported vacant sublease space of 186,108 square feet at the end of first quarter 2015, down from the 208,699 square feet reported at the end of the fourth quarter 2014. There were 91,366 square feet of sublease space vacant at the end of the third quarter 2014, and 129,748 square feet at the end of the second quarter 2014.

Warehouse projects reported increased vacant sublease space from the fourth quarter 2014 to the first quarter 2015. Sublease vacancy went from 76,445 square feet to 227,761 square feet during that time. There was 199,014 square feet at the end of the third quarter 2014, and 185,005 square feet at the end of the second quarter 2014.

Rental Rates

The average quoted asking rental rate for available Industrial space was $16.40 per square foot per year at the end of the first quarter 2015 in the San Francisco market area. This represented a 4.1% increase in quoted rental rates from the end of the fourth quarter 2014, when rents were reported at $15.75 per square foot.

The average quoted rate within the Flex sector was $26.61 per square foot at the end of the first quarter 2015, while Warehouse rates stood at $12.23. At the end of the fourth quarter 2014, Flex rates were $25.23 per square foot, and Warehouse rates were $11.94.

Deliveries and Construction

During the first quarter 2015, two buildings totaling 108,080 square feet were completed in the San Francisco market area. This compares to 0 buildings completed in the previous three quarters.

There were 252,593 square feet of Industrial space under construction at the end of the first quarter 2015.

Some of the notable 2015 deliveries include: 901 Rankin St, an 82,480-square-foot facility that delivered in first quar- ter 2015 and is now 100% occupied by Goodeggs and Mollie Stone’s Markets, and 1 Kelly Ct, a 25,600-square-foot building that delivered in first quarter 2015 and is now 100% occupied by CS Bio Company, Inc.

The largest projects underway at the end of first quarter 2015 were The Cove – Building 3, a 132,034-square-foot building with 0% of its space pre-leased, and The Cove – Building 4, a 120,559-square-foot facility that is 0% pre-leased.

Inventory
Total Industrial inventory in the San Francisco market area amounted to 94,507,020 square feet in 4,841 buildings as of the end of the first quarter 2015. The Flex sector consisted of 23,955,743 square feet in 789 projects. The Warehouse sector consisted of 70,551,277 square feet in 4,052 buildings. Within the Industrial market there were 516 owner-occupied buildings accounting for 12,428,802 square feet of Industrial space.

Sales Activity

Tallying industrial building sales of 15,000 square feet or larger, San Francisco industrial sales figures fell during the fourth quarter 2014 in terms of dollar volume compared to the third quarter of 2014.

In the fourth quarter, nine industrial transactions closed with a total volume of $58,055,000. The nine buildings totaled 430,025 square feet and the average price per square foot equated to $135.00 per square foot. That compares to eight transactions totaling $80,684,000 in the third quarter. The total square footage was 349,762 for an average price per square foot of $230.68.

Total year-to-date industrial building sales activity in 2014 is up compared to the previous year. In the twelve months of 2014, the market saw 46 industrial sales transactions with a total volume of $410,518,100. The price per square foot has averaged $199.10 this year. In the twelve months of 2013, the market posted 31 transactions with a total volume of $191,567,100. The price per square foot averaged $176.40.

Cap rates have been higher in 2014, averaging 6.35%, compared to the twelve months of last year when they averaged 6.19%.

Link to Full Report: Costar Q1 Industrial Report 2015

Apr

San Francisco Commercial Real Estate News: Does SF tech firms shedding office space indicate a bubble?

Source: San Francisco Business Journal
Reporter: Cory Weinberg
Date Posted: April 23, 2015

About 50,000 square feet of space in at 1455 Market St. just hit the market – a big block leased by the public advertising tech company Rocket Fuel. The brokerage Savills Studley said in a report that Rocket Fuel (NASDAQ:FUEL) is the kind of company subleasing space after “not expanding as quickly as anticipated or shedding a bit of payroll.” After the company’s revenue growth faltered, it said it wouldn’t hire as aggressively.

Rocket Fuel isn’t alone in shopping around its offices. The sublease market in San Francisco has suddenly ticked up, and sublease space now makes up the largest percentage of vacant space since the depths of the recession, according to new data by the brokerage Cushman & Wakefield. San Francisco and Silicon Valley lead the nation in sublease space as a percentage of vacancies – about 13 percent for each.

It’s a leading indicator important enough to raise eyebrows if it means that companies got too ambitious with their real estate needs and are shedding space – puncturing a hole in a potential office market bubble.

But market watchers aren’t jumping to that conclusion yet.

Developers and brokers aren’t panicking because the raw amount of sublease space on the market in San Francisco – nearly 650,000 square feet – doesn’t come close to the 2 million square feet of subleased space on the market during the recession or the 6 million square feet during the dot-com bust. The amount of total vacant space is also at a 15-year low, according to Cushman & Wakefield.

Sublease space increased a bit last quarter in part because “tenants (particularly tech-related tenants) are leasing or pre-leasing ahead of hiring to lock in today’s rents before further increases,” Cushman & Wakefield’s research director Robert Sammons wrote.

Sammons said San Francisco and Silicon Valley’s high proportion of subleased space has some likely company: New York City’s Midtown South submarket, which is also heavy on technology companies, has the same sublease rate.

“Not every tech firm is going to be the next Google, so there will be an ebb and flow where they expanded more than they should have,” he added in a phone call. “The flip side of that is that there are a lot of tenants looking for built, plug-and-play space because they don’t know what the next year is going to bring them.”

Plus, he added, San Francisco is still posting some of the best employment numbers in the country and office development hasn’t slowed – two other indicators to watch.

A boost in sublease space can help companies feeling the squeeze from the city’s 8.1 vacancy rate, one of the lowest in the nation. The companies shedding the space get to cash in, too.

The digital real estate marketplace Trulia (NASDAQ:TRLA), for example, just put two floors – 26,600 square feet – up for sublease in the new, gleaming 535 Mission St. tower. A spokesman said the company is “investigating opportunities in the normal course of business” and taking advantage of San Francisco’s “hot commercial real estate market.” The company was also just acquired by Zillow, which also put about 20,000 square feet of its 222 Bush St. on the sublease market.

Even Salesforce (NASDAQ:CRM) is subleasing about 144,000 square feet in One California St. and 70,000 square feet in 123 Mission St. as it moves into its eventual urban campus next to the Transbay Transit Center.

Other available sublease spaces include Microsoft’s 30,000 square feet at 835 Market St., Conversant’s 32,000 square feet at 160 Spear St. and IZ-ON’s 40,000 square feet at 600 Harrison St.

In San Carlos and Redwood City, new sublease openings by SoftBank and DreamWorks add up to about to 400,000 square feet
“In most cases, sublet space has been added by companies that are banking space for future use and want to monetize in the meantime,” according to Savills Studley’s latest market report. “The sublet space provides scant relief to a space-parched market.”

Link to article: Office Space Bubble

Apr

San Francisco Commercial Real Estate News: SF Joins World’s Priciest Cities for Office Space

Source: San Francisco Business Times
Reporter: Roland Li
Date Posted: April 22, 2015

San Francisco has the fifth-most expensive “prime” office space in the world, according to commercial brokerage Newmark Grubb Knight Frank’s 2015 Global Cities Skyscraper report.

San Francisco’s most expensive offices, mostly located on the top floors of skyscrapers, have rents of $97 per square foot, said Newmark. San Francisco was beaten in costs only by Tokyo, London, New York and Hong Kong, which had the highest prime office rents of $250.50 per square foot, according to Newmark. San Francisco outpaced global centers like Singapore, Sydney and Moscow and beat out every other U.S. city, aside from New York, in the report.

Climbing skyscraper rents are an indication of the revitalization of cities. Companies are looking to retain workers by offering more collaboration within modern buildings and locations in central business districts, according to Newmark.

“A high quality office environment is an essential part of building a business. With the economy improving, firms want offices that provide an inspiring place to work and demonstrate they value their employees,” said William Beardmore-Gray, head of global leasing services at Knight Frank.
San Francisco’s rental growth for upper floor skyscrapers was 2.1 percent, the eighth highest, during the last six months of 2014. New York’s midtown neighborhood led the way with a 20 percent jump, according to Newmark Grubb Knight Frank.

The report only considered the most expensive part of the market. Most San Francisco Class A buildings have rents in the $60. Either way, the city has become one of the hottest markets in the world, largely from the strength of the tech industry.

“San Francisco is certainly one of the most expensive cities for prime office space in the world and is experiencing the fastest rate of cost increase in the U.S.,” said Colin Yasukochi, research director at CBRE’s San Francisco office. CBRE ranked San Francisco as the ninth-most expensive city in the world for prime office space in a January report.

The buildings with the highest rents in San Francisco include 101 California St., 555 California St., the Ferry Building, Embarcadero Center and One Market Plaza to name a few. In Silicon Valley, prime buildings can also command huge rents. Venture capital firms along Sand Hill Road in Menlo Park pay $132 per square foot, and BNY Mellon Wealth Management is paying $114 per square foot at 537 Hamilton Ave. in Palo Alto, according to an industry source.

Although San Francisco has high rents, its towers are not very tall compared to the rest of the world. The Transamerica Pyramid is 1,065 feet and the only completed building in the city over 1,000 feet. The under-construction Salesforce Tower will be 1,070 feet. New York’s One World Trade Center is 1,776 feet tall including its antennae, and the world’s tallest building, Burj Khalifa in Dubai, is a staggering 2,717 feet. There are 79 towers over 1,000 feet today, up from 19 in 2009, and 40 percent are in China.

Link to article: Keeping Expensive Company

Apr

San Francisco Commercial Real Estate News: Expanding Manufacturing Space

How SFMade is expanding San Francisco’s manufacturing space
Source: San Francisco Business Times
Reporter: Annie Sciacca
Date Posted: April 21, 2015

It’s expensive to build office space in San Francisco, but it can be even more challenging to build industrial space, and make it pencil, according to SFMade executive director Kate Sofis.

That’s why SFMade,which works to expand manufacturing in San Francisco, launched a sister nonprofit, PlaceMade a nonprofit real estate development initiative akin to an affordable housing developer.

Similar to affordable manufacturing space developers in other cities, such as Greenpoint Manufacturing out of Brooklyn, PlaceMade is focused on partnering with the city and with private sector developers to create industrial space. It also provides consulting support to developers or architects who need input on how best to design an industrial product suited for manufacturing.

“In this city we haven’t focused on manufacturing in the past as much as other cities have,” Sofis said. While zoning is effective, and there isn’t a ton of encroachment on industrial space from other uses, the urgent need at the moment is simply for more space.

The demand for space has bakers and chocolatiers competing for space with businesses like repair shops, clothing makers and 3D printer manufacturers. Some are bootstrapping their money while others get investment, and the differences in products mean wildly different profit margins. That means bidding wars can knock out those with less cash flow.

“There is a shortage right now; rents are up 30 to 40 percent just in the past two years or so,” David Lai, a principal with Yosemite Investment LLC, told the Business Times in September. That South San Francisco-based company develops and runs industrial space.

The first project to come from PlaceMade is the 56,000-square-foot multi-tenant industrial building that could be the first new manufacturing building in decades. Approved in January, more details on the project are emerging.

SFMade’s “manufacturing foundry” is part of a three-building site at 100 Hooper St. in the Potrero Hill neighborhood. Currently a self-storage facility, SFMade’s building, which is at 150 Hooper, would provide space for food producers, clothing makers and other startup manufacturers in the city.

Designed by Pfau Long Architecture, the building is the first project to take advantage of legislation sponsored by Supervisor Malia Cohen and Mayor Ed Lee that offers developers increased office space in exchange for dedicating a large portion of their buildings to manufacturing space.

The other buildings at 100 Hooper will connect via skybridges, making it a “campus-style” project, said Daniel Murphy of Urban Green Devco, which is developing the site.

In addition to the SFMade building, 100 Hooper will have another 90,000 square-feet of industrial space on the ground floor of the other two buildings, and the remainder — about 290,000 square-feet — will go to offices.

SFMade will own the manufacturing building outright, and it is pouring $20 million into construction costs alone, Sofis said, adding that the number would be much higher if the organization was not partnering with a developer as it is.

Having its own manufacturing space will allow SFMade to further its effort to find space for startup manufacturers and pursue public subsidies, such as new market tax credit, that will allow it to ultimately lower the rent for the manufacturing spaces it rents out, Sofis said.

SFMade will rent out the spaces at a range of about $15 to $22 per square-foot — or less than $2 per month per square-foot. Other industrial spaces with the site’s proximity to downtown San Francisco are trending well above $24 — in some cases, $36 — per month, Sofis said.

The space will also provide around 200 manufacturing jobs, mostly for people in entry-level positions and from lower-income communities. And SFMade will have personnel in the building to provide consulting and resources for manufacturers.

There’s been a flight of light industrial users to other cities with lower costs, Murphy said.

“We haven’t had space to accommodate the growing industrial sector,” he said. “This is a response to those trends.”

While SFMade will continue to help its network of manufacturers find space, PlaceMade’s focus will be on creating permanently affordable industrial space.

Some areas of the city are more ripe for industrial development than others. Areas like the Dogpatch and the northeast portion of the Mission have vibrant manufacturing scene, including Rickshaw Bagworks, Heath Ceramics, and Timbuk2.

The lower Potrero area, where the Hooper buildings are, holds potential, too, Sofis said, as does the Bayview neighborhood. The key is adding density and building vertically on sites that make sense for manufacturing. The Bayview, for example, has spots that could be renovated for better uses or added to. There are a few self-storage facilities that could provide cross-subsidization needed for such projects, Sofis said. In other neighborhoods, office space makes more sense as a partner in developing this kind of space.

Construction on 100 Hooper will likely begin in the second half of this year, Murphy said, and will take about a year to build.

Link to Article: SFMADE

Apr

Calco Commercial Real Estate: Top Leasing Firm in San Francisco

Calco Commercial Real Estate has been named a “Top Leasing Firm” by CoStar! Additionally, Scott Mason has also won a “Power Broker” Award as a top Industrial Broker in San Francisco for 2014. Click here for the full story:

Costar Power Broker Winners

Over the past year, Calco Commercial has completed over 55 industrial, flex and office lease and sale transactions totaling 340,000+/- square feet. Based on the number of successfully completed industrial real estate transactions, Calco Commercial is the number one industrial leasing/sales brokerage firm located in San Francisco. Calco Commercial Real Estate has completed more industrial real estate deals than any other firm in San Francisco over the last year, and continually out-performs the competition. Calco is an independently run and locally founded company specializing in Landlord and Tenant representation. If you have any commercial real estate requirements or simply have questions about the San Francisco or Peninsula real estate markets, call 415.970.0000.

Apr

San Francisco Commercial Real Estate News: Warehouses become highrises

Warehouses become highrises: Map of S.F.’s Central SoMa real estate boom
Source: San Francisco Business Times
Reporter: Cory Weinberg
Posted: April 6, 2015

When you look at the map of some of the most ambitious projects that developers are proposing in South of Market, they’re concentrated along the new Central Subway and near the current Caltrain station at 4th and Townsend Streets.

On Friday, the Business Times reported that a family trust called Solbrach Property Group filed plans to build a 350-foot residential highrise with 426 units at 4th and Brannan Streets. Around that block, huge office and residential projects by CIM Group and Tishman Speyer will transform the industrial area that is being rezoned.

The Board of Supervisors is expected to green light the rezoning by early next year. That will unlock huge value for landowners to build taller office or residential buildings, which would replace the existing — and less lucrative — production, distribution and repair buildings. That value has created pressure for the city to extract enough money from developers for affordable housing, which I detailed in a February cover story.

Even though the Solbrach residential development is in the very early stages, it could turn into a showdown over heights. The proposed tower will sit on a plot that’s only 16,000 square feet, so it’s not one of the largest in the neighborhood. The Planning Department only wants the building to be 250 feet high — at most — and neighborhood activist John Elberling echoes that sentiment.

“Jamming a luxury highrise into there really is too much. We want to focus development of that maximum scale — residential or commercial — on the large sites in SoMa that are at least one acre in size,” said Elberling, who runs the affordable housing advocacy group TODCO.

The Planning Department recently published guidelines for large development sites “that offer tremendous potential for transformative new development.” In its guidelines for how high developers can build, it reiterates that “the predominant character of SoMa as a mid-rise district should be retained,” instead of it becoming a slew of highrises.

Link to article: Warehouses become highrises