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7/31/2019 CCNKF Northbay Office Q2 2012
1/10
NORTH BAY 3RD QUARTER
SECOND QUARTER 2012 NORTH BAY OFFICE SPACE
MARIN OFFICE
1101 Fifth Avenue, Suite 230 Larkspur, CA 94939
Tel: 415.526.7676 Fax 415.526.7679
SANTA ROSA OFFICE
2455 Bennett Valley Road, C200, Santa Rosa, CA 95404
Tel: 707.583.8400 Fax 707.583.8499
www.ccareynkf.com
Lic #00832933
http://www.ccareynkf.com/http://www.ccareynkf.com/7/31/2019 CCNKF Northbay Office Q2 2012
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Marin County Office Market Second Quarter 2012
Submarket Building
Class
Inventory* Direct
Available
Sublease
Available
Vacancy
Rate
2q12 Net
Absorption
Avg
Asking
Rent
Rent
Change %
Southern Marin Class A 516,877 117,164 11,019 24.8% -6,604 $3.48 -1.7%
Class B 386,798 20,981 0 5.4% 2,400 $ 2.57 -3.6%
Total 903,675 138,145 11,019 16.5% -4,204 $3.32
Central Marin Class A 638,159 55,847 0 8.8% 6,132 $3.64 2.2%
Class B 457,804 15,681 16,460 7.0% -1,406 $2.54 -2.7%
Total 1,095,963 71,528 16,460 8.0% 4,726 $3.41Central San Class A 751,544 96,852 36,131 17.7% -13,924 $ 2.96 1.9%
Class B 516,610 78,378 9,591 17.0% 169 $ 2.18 -1.6%
Total 1,268,154 175,230 45,722 17.4% -13,755 $2.58
North San Rafael Class A 1,439,113 455,696 0 31.7% 16,429 $2.29 1.5%
Class B 659,663 44,813 0 6.8% 2,505 $ 2.03 -0.2%
Total 2,098,776 500,509 0 23.8% 18,934 $2.26
Novato Class A 1,821,774 190,992 482,107 36.9% -214,456 $2.26 0.4%
Class B 607,840 67,611 0 11.1% 7,191 $1.74 -0.2%
Total 2,429,614 258,603 482,107 30.5% -207,265 $2.00
Marin County Class A 5,167,467 916,551 529,257 28.0% -212,423 $2.58 1.2%
Class B 2,628,715 227,464 26,051 9.6% 10,859 $2.07 -0.9%
Total 7,796,182 1,144,015 555,308 21.8% -201,564 $2.47
Rents are based on a weighted average of direct available space for each class and submarket.*Buildings over 15,000 square feet.
Available Spaces by Size and Submarket
Submarket 0- 2,000 SF 2,000-5,000 SF 5,000-10,000 SF 10,000 - 25,000 SF 25,000 + SF
Southern Marin 80 21 11 1 0
Central Marin 32 12 2 1 0Central San Rafael 86 26 7 3 0
No. San Rafael 61 15 8 3 3
Novato 50 42 17 12 5
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Marin County Office Market Second Quarter 2012
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Marin County Office Market Second Quarter 2012
Marin County Historical Vacancy Rate vs. Average Asking Rent
Marin County Comparative Vacancy Analysis by Submarket2q2011 vs 2q2012
$2.40
$2.50
$2.60
$2.70
$2.80
$2.90
$3.00
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Vacancy Rate Average Rent
14.6
%
11.2
%
2
5.0
%
22.4
%
21.3
%
16.5
%
8.0
% 1
7.4
% 2
3.8%
30.5
%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Southern Marin Central Marin Central SanRafael
North SanRafael
Novato
2q11
2q12
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Marin County Office Market Second Quarter 2012
Marin County Historical Average Class A Asking Rental Rates by Submarket
Change in Average Class A Asking Rents from Previous Quarter
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
$3.40
$3.60
$3.80
$4.00
$4.20
1q05
2q05
3q05
4q05
1q06
2q06
3q06
4q06
1q07
2q07
3q07
4q07
1q08
2q08
3q08
4q08
1q09
2q09
3q09
4q09
1q10
2q10
3q10
4q10
1q11
2q11
3q11
4q11
1q12
2q12
NorthSanRafaelNovato
MarinCounty
CentralSanRafaelCentralMarin
SouthernMarin
-1.7%
2.2
%
1.9
%
1.5
%
0.4
%
-3.6
% -2
.7% -1
.6%
-0
.2%
-0
.2%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
Southern Marin Central Marin Central SanRafael
North SanRafael
Novato
Class A
Class B
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Marin County Office Market Second Quarter 2012
Marin County Office Market OverviewBy Mark Carrington
Marin County has not yet experienced the dynamic recentgrowth seen on the San Francisco Peninsula. Tenant activityhas been anemic in Marin in 2012 and there has been a netaddition of 171,000 square feet of available space in 2012.Economic uncertainty remains, and election year politics hasnot provided tenants with a high level of confidence that theywill experience significant growth soon. An increase of tenanttours with significant size requirements was experience in thesecond quarter. There is some tightness in specific size
ranges in certain submarkets and Central Marin as a wholeenjoys a vacancy rate of 8 percent.
VacancyThe steady decline of Marin Countys office vacancy rate wasinterrupted in the 2
ndQuarter by an increase of 216,703 square
feet of sublease space on the market at the Firemans FundCampus in North Novato. After staying under 20 percent sincethe 3
rdQuarter 2011, the vacancy rate climbed 2.6 percent to
21.8 percent in the 2nd
Quarter 2012.
Market remains very segmented with many small spacesavailable throughout the market and larger spaces clustered inthe northern part of the market. If you are a tenant looking forover 5,000 square feet in Central Marin, you currently have 3spaces to choose from. This distribution is healthy, as most
tenant demand in Marin County is focused on spaces under2,000 square feet.
Leasing Activity & AbsorptionWhile touring activity seemed to increase in the secondquarter, the number of closed office leasing transactionsremained well below normal. In 2011 there were 273 leasestransacted in office buildings over 10,000 square feet in2012. The aggregate size of those leases was 902,279square feet. At the midpoint of 2012, approximately 90leases have been completed in the same buildings with anaggregate size of 164,543 square feet
Net absorption was negligible even if the additional subleasespace at the Firemans Fund Campus is ignored. A number of
significant lease transactions are in progress and are expectedto close in the 3rd
Quarter.
Rental Rates and ConcessionsWith one exception only, Southern Marin, Class A rentsincreased in each Marin submarket. As in recent past, theincrease was slight in the North of the County and dramatic inCentral Marin. A major component in the rent growth inCentral Marin are significant rent increases in Equity Office-owned buildings where rents are likely being pushed in order to
maximize pricing for the Portfolio of Properties that EquityOffice has on the market.
Class B rents saw fractional declines in the north of theCounty, with greater declines as you move south. SouthernMarin saw a 3.6% decline in average Class B asking rates.The fact that higher quality (more expensive) Class B optionshave been leased may, at least in part in part, explain thisphenomenon.
Sales TransactionsThere were two notable sale transactions in Marin County in
the 2nd
Quarter. 1200 Fifth Avenue, an 11,089 square foot office
building, was 65% leased at the time of sale. TheProperty generated 7 offers, 4 of which ended up overthe asking price of $2,250,000. The Property wassold to Jonathan Parker, owner of 1101 Fifth Avenue.
790 Mission Avenue, a 9,500 square foot officebuilding sold to a user/investor for $2,365,000, justunder $250/SF.
The Equity Office Portfolio generated some interest, but itappears that EOP has decided to retain ownership.
Outlook
The huge volume of available sublease space in Novato willkeep a lid on rent growth in Northern Marin for many quartersto come. A significant percentage of that sublease space isminimally divisible and half of the Disney sublease at HamiltonLanding has highly specialized improvements.
With many choices for tenants in most size ranges, tenants arenot able to see the potential in spaces that are not improvedclose to their requirement. Some landlords have createdmarket-ready spec spaces and have proactively painted andcarpeted spaces in an effort to be more competitive.
It is expected that there will continue to be economicuncertainties in the next few quarters which, with thepresidential election, will affect tenant confidence. Recenttouring activity is encouraging and current requirementsexceed 2012 leasing activity to date.
The sale of the Equity Office Portfolio will mean that many ofthe most influential office properties in the market will be undernew ownership. It is not yet possible to predict what effect thatwill have on pricing or absorption on the market, but pricing islikely to be high and desired returns will mean continued strongpricing in those buildings.
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Sonoma County Office Market Second Quarter 2012Sonoma County Office Market OverviewBy: Barry Palma CCIM
Senior Vice President
Small Size deals still dominate the leasing activity asinvestors are still actively searching for and buyingdistressed properties!The Sonoma County office market continues to show promisedominated by the small companies expanding and owner/usersand investors active in the market. The majority of thecompleted leases have been the smaller size leases less than3,000 square feet and the larger leases signed by the main
hospitals. Some firms looking for larger space tend to want tobuy if they can and take advantage of the low interest ratesand below replacement cost values of larger properties.
Vacancy RateOverall the office vacancy rate for Sonoma County is at 22.3%with Class A at 26.8% and Class B space at 18.4%. The lowestvacancy rate is in Santa Rosa Sub market at 19.2% andPetaluma still showing the highest vacancy rate at 31.57 %.
The flex building vacancy rate is currently 14.83% with themajority of the space being absorbed by the high techmanufacturing and R&D and medical device companies. Somerecent expansions include Enphase Energy in Petaluma, andPNI Sensor Corporation in Santa Rosa.
In Santa Rosa the office leasing activity was completed bySanta Rosa Memorial Hospital Hospice leasing 12,000 sf andSutter Medical expanding in 3883 Airway Drive. Others leasesinclude the VA Hospital expansion at the airport area andKaiser Foundation leasing 10,000 sf in two building across thestreet from their hospital.
Rohnert Park has seen a large employer move from SantaRosa. Marmot Mountain signing a 42,000 sf office lease onState Farm Drive and additionally occupying 15,000 sf ofwarehouse space next door. A three building 30,545 sf officeproject recently sold for $60.57 psf. This property is a singlestory office building with high vacancy and was taken back bythe lender.
While many businesses are still seeing profits increase thisyear, the business confidence and motivation to expand andhire more employees is tempered by the negative politicalclimate in Washington and continued concerns about Europeoverlaid by the gyrations in the stock market. Tenants seem totake longer to decide on a location trying to find space thatmeets their specific needs with limited tenant improvements sothey can negotiate more aggressive leasing terms.
Some landlords are offering below market deals to attract aprospective tenant or to keep their tenants in the short term.
In a recent report prepared by Moodys analytics, the regionaleconomic outlook in the short term anticipates in the second
half of the year the recovery will strengthen with labor andhousing markets gradually strengthening lifted by solid demandfor tech goods and specialty wines. Over the long term, thetech, R&D and healthcare with expand This will allow thebusiness services sector continue to expand all of whichshould increase leasing activity and absorption of office andflex space. The encouraging part is there are some largetenants in the market now looking to finalize leases in the nextfew quarters which should result in more positive absorption in2012.
Owner/User buyers will continue to take advantage of lowpricing and favorable financing to lock in low occupancy costs.Equity Office , in addition to listing its Marin Portfolio for sale, ispreparing to bring its remaining Sonoma County assets to
market. Also poised to hit the market are Skip Bergs portfolioof Stony Point Office Buildings.
Note about Sonoma County Market Data
In order to more accurately and completely report the state ofthe office market in Sonoma County, Cornish & CareyCommercial Newmark Knight Frank has significantly reviewedand revised building classifications and added additionalinventory. Flex inventory has been separately categorized forthis quarter and comparative data will be added in futurereports.
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Sonoma County Office Market Second Quarter 2012
Sonoma County Office Market Overview
Submarket
Building
Class Inventory
Direct
Available
Sublease
Available
Vacancy
Rate
2Q12 Net
Absorption
Average
Asking
Rent
2012 Rent
Growth
Petaluma Class A 1,273,288 271,280 155,831 33.54% -6,940 $1.90 -1.12%
Class B 643,771 178,171 0 27.42% 8,728 $1.64 -3.11%
Total 1,917,059 449,451 155,831 31.49% 1,788 -2.91%
Flex 1,401,592 22,156 0 1.58%
Rohnert Park Class A 214,918 72,923 0 33.93% -9,960 $1.77 4.85%
Class B 1,157,831 219,532 0 18.96% 68,802 $1.30 -7.78%
Total 1,372,749 292,455 0 21.30% 58,842 2.73%
Flex 790,855 259,654 0 32.83%
Santa Rosa Class A 2,464,116 463,144 97,445 22.75% -7,696 $1.67 -3.70%
Class B 2,676,637 371,524 54,105 15.90% 24,899 $1.38 -3.17%
Total 5,140,753 834,668 151,550 19.18% 17,203 -3.22%
Flex 2,054,701 347,947 16.93%
Sonoma Class A 3,952,322 807,347 253,276 26.8% -24,596 $1.76
Class B 4,478,239 767,561 54,105 18.3% 102,429 $1.42
Total 8,430,561 1,574,908 307,381 22.3% 77,833
Flex 4,247,148 629,757 0 14.83%
SANTA ROSA
Submarket InventoryDirect
AvailableSubleaseAvailable
VacancyRate
NetAbsorption
AverageAsking Rent
2012 RentChange
Northwest 633,254 65,413 1,025 10.49% 1,025 $1.39 -14.64%
Southeast 436,227 61,470 0 14.09% 4,515 $1.48 -5.23%
Northeast 631,766 52,071 8,910 9.65% 15,055 $1.41 -6.89%SR BusinessPark 462,729 97,500 5,130 22.18% (19,983) $1.48 6.56%
Fountaingrove 410,811 61,663 9,507 17.32% (12,644) $1.63 -20.68%
Corporate Center 325,385 127,950 7,521 41.63% (6,425) $1.66 0.00%
Downtown 1,104,405 115,539 14,034 11.73% 15,071 $1.79 -0.25%
Stony Point 436,090 109,412 4,177 26.05% 6,098 $1.73 -2.15%
Airport Area 843,866 143,650 17,107 19.05% 9,765 $1.63 0.00%
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Sonoma County Office Market Second Quarter 2012
Sonoma County Historical Vacancy Rate vs. Average Asking Rent
Sonoma County Comparative Vacancy Analysis by Submarket 4q2010 vs 4q2011
$1.50
$1.60
$1.70
$1.80
$1.90
$2.00
$2.10
$2.20
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Vacancy Rate Average Rent
31.7
%
27.1
%
15.4
%
14.2
%
15.0
%
25.5
%
12.3
%
50.3
%
15.4
%
24.6
%
26.7
%
28.2
%
24.4
%
10.3
%
14.1
%
9.7
%
22.2
%
17.3
%
41.6
%
11.7
%
26.0
%
19.1
%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Petaluma
RohnertPark/Cotati
NorthwestSR
SoutheastSR
NortheastSR
SR
BusinessPark
Fountaingrove
Corp.
Center
DowntownSR
StonyPoint
Airport
2q11
2q12
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