8/13/2019 East Bay Oakland R&D Q4 2013 Market Report

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EAST BAY OAKLAND R&D

-400

-200

0

200

400

600

800

1,000

2009 2010 2011 2012 2013

Square

Feet(000

s)

18%

19%

20%

21%

22%

23%

24%

2009 2010 2011 2012 2013

Net Absorption

Vacancy

10-Year Average

Vacancy19.6%

Net Absorption(52,007) SF

Deliveries0 SF

Asking Rent$0.88 NNN

Market Tracker*Arrows = Current Qtr Trend

R&D Market Shows Positive Signs in 2013

The good news for landlords? Over the course of 2013, R&D vacancy levels in the Eas

Bay/Oakland marketplace reached the lowest levels that we have recorded since Q2 200

The bad news? Vacancy at that time stood at 15.2% and has been lodged above the 20

mark for most of the past decade. The I-80/I-880 Corridor R&D market saw vacancy drop a

low as 19.4% in Q3 2013, though it ticked back up to 19.6% to close the year.

Recovery for the East Bays R&D marketplace has been slow at best. After peaking durin

the recession at 23.7% (Q2 2009), it has moved downward slowly and haltingly. Though

crept back up in Q4, the consistent declines it posted over the first nine months of 201

marked the first three quarter stretch of consecutive vacancy declines that the market ha

recorded since 2007. One year ago, R&D vacancy stood at 20.4%. Over the past twelv

months, the marketplace has recorded over 275,000 square feet of occupancy growth, foutpacing the 2,000 square feet of positive net absorption posted in 2012 but also we

below the 921,000 square feet of expansion that took place in 2011. Regardless, thoug

this is the third consecutive year that the market has posted occupancy growth, it has on

been in 2013 that we have begun to see a consistent pattern of declining vacancy com

into focus. Even in the strong growth year of 2011, occupancy gains were mostly driven

just one quarter while two quarters posted significant increases in vacancy. But even whi

the majority of 2013 was marked by gradually increasing tenant demand, consistent leasin

activity and falling vacancy, Q4s slight uptick in vacancy demonstrates that the market st

faces some challenges.

Over the course of Q4 2013, vacancy increased from 19.4% to 19.6% as just over 52,00

square feet of space was returned to the market. That being said, leasing activity remaine

fairly constant. We tracked total deal activity of 697,000 square feetgross absorption ov

the first three quarters of the year averaged 713,000 square feet per quarter. The uptick

vacancy posted in Q4 did not come about as a result of slowing demand, but a few larg

space givebacks which were largely limited to just one submarket. Nearly all of the negativ

absorption for the quarter occurred in Fremont, where several sizeable spaces went vacan

The largest of these spaces was 73,000 square feet at 47451-47475 Fremont Boulevar

Despite this setback it is critical to note that Fremont was also accountable for over 75% o

all occupancy growth this year. Fremont had active second and third quarters whe

occupancy growth totaled 431,000 square feet combined. The San Leandro submarket

though relatively smallalso performed notably this year. Vacancy here now stands

12.4% (well below the market average) and continues to trend downward. We expe

moderate growth in 2014. Rapidly tightening vacancy and increasing rental rates in th

Silicon Valley and Peninsula markets should drive greater tenant demand and activity.

R&D Market SnapshotEast Bay Oakland Fourth Quarter 2013

www.cassidyturley.

Highlights:

Vacancy has decreased to 19.8% at year-end 2013 from 20.4% last year.

Strength in the user sale market persists; two large deals closed in Q4.

The Fremont trade area provided the greatest boost to the market this year wit

155,000 square feet of occupancy growth in 2013

Asking rental rates have remained relatively flat for the past six quarters and ar

presently averaging $0.88 per square foot (on a monthly triple net basis).

We expect stronger market demand going into 2014; look for consisten

declines in vacancy next year with rental rate growth returning to th

marketplace as vacancy begins to fall below the 15% plateau.

Economic Indicators

Q4 13 Q4 12

East Bay Employment* 1.217M 1.213M

East Bay Unemployment* 6.8% 8.2%

U.S. Unemployment 7.2% 7.8%

U.S. CCI 74.2 70.4

*East Bay includes Alameda & Contra Costa Counties

http://www.cassidyturley.com/

8/13/2019 East Bay Oakland R&D Q4 2013 Market Report

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EAST BAY OAKLAND R&D

R&D Market SnapshotEast Bay Oakland Fourth Quarter 2013

www.cassidyturley.

Asking Rental Rates Remain Stable

The average asking rental rate has remained relatively flat over the past six quarters and presently $0.88 per square foot (on a monthly triple net basis). Rents are up 10% from Q

2012 when the average stood at $0.80. However, they have yet to return to pre-recessio

levels when they peaked at $1.10 per square foot. We anticipate average rents will rema

at or near their present levels until we see vacancy decrease below 15% and larger blocks o

space are leased up. Though this will likely not occur until late 2014 or early 2015

demand from the Peninsula and Silicon Valley may put upward pressure on rents for th

highest quality space in the Southern I-880 Corridor trade areas, such as Union City

Newark and Fremont, from users looking for quality space at lower rents. Rapidly tightenin

vacancy rates in these neighboring markets has caused considerable rental rate growth ther

in 2013 and is expected to continue to do so in 2014.

User Sales Return in the Fourth QuarterUser sales picked up again in the final quarter of 2013 following a third quarter lull. Th

two largest user transactions this quarter were both sales in the Fremont trade are

Genmark Automation purchased a 86,000 square foot building at 46723 Lakevie

Boulevard in the largest transaction of the quarter, while Synnex Corporation bought

65,000 square foot R&D building at 44217 Nobel Drive.

Though the average lease size was smaller than in previous quarters this year, there were

handful of larger lease deals transacted in Q4 2013. The largest lease transaction of th

quarter was Strykers renewal at 47421 Bayside Parkway in Fremont which totaled 46,00

square feet. PCS inked the largest new lease of the quarter at 48633 Warm Spring

Boulevard in Fremont for three years. This space had been on the market for over seve

years and contributed 35,000 square feet to occupancy growth this year.

0

10

20

30

40

50

$0

$200

$400

$600

$800

$1,000

2009 2010 2011 2012 2013

Sales Volume, $Mil # Bldgs Sold

R&D Sales

$0.75

$0.80

$0.85

$0.90

$0.95

$1.00

$1.05

$1.10

2009 2010 2011 2012 2013

Average Asking Rate

Availabilities by Size (SF)

10-25K 25-50K 50-100K 100K+

Key Lease Transactions Fourth Quarter 2013

PROPERTY SF TENANT TRANSACTION TYPE SUBMARKET

47421 Bayside Pkwy 45,576 Stryker Renewal Fremont

48633 Warm Springs Blvd 35,360 PCS Relocation Fremont

47281 Bayside Pkwy 23,436 Avocent Corporation Renewal Fremont

3825 Bay Center Pl 19,315 Tyco Electronics Relocation Hayward

47703 Fremont Blvd 19,262 Cynosure, Inc Renewal Fremont

20991 Cabot Blvd 19,019 C orrpro Companies Relocation Hayward

48810 Kato Rd 16,035 Telepath Relocation Fremont

32920 Alvarado-Niles Rd 15,208 Amber Kinetics Relocation Union City

40539 Encyclopedia Cir 10,424 Lightbridge, Inc Relocation Fremont

650 Whitney St 10,281 Methods Machine Tool Relocation San Leandro

8/13/2019 East Bay Oakland R&D Q4 2013 Market Report

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Cassidy Turley R&D Market SnapshotEast Bay Oakland Fourth Quarter 2013

R&D SubmarketsEast Bay Oakland

www.cassidyturley.

Molly HerrickResearch Analyst

555 12th StSuite 1400Oakland, CA 94607Tel: 510.465.8000Fax: 510.465.1350

Managing Editors:

Garrick BrownDirector of ResearchGarrick.Brown@cassidyturley.com

The information contained within this report is gatheredfrom multiple sources considered to be reliable. Theinformation may contain errors or omissions and ipresented without any warranty or representations as to itaccuracy.

Copyright 2013 Cassidy Turley.All rights reserved.

INVENTORY SUBLET VACANT DIRECT VACANT VACANCY

RATECURRENT NETABSORPTION

YTD NETABSORPTION

UNDERCONSTRUC-

TION

AVERASKI

RENTClass

Submarket

Berkeley 849,998 0 13,763 1.6% 0 0 0 $1.

Emeryville 1,733,312 0 3,280 0.2% 0 6,719 0 $1.

San Leandro 1,139,126 4,988 136,391 12.4% 21,966 57,621 0 $0.

Hayward 3,983,678 50,400 570,843 15.6% 70,651 (62,884) 0 $0.

Union City 922,970 0 227,765 24.7% (32,007) 4,215 0 $0.

Newark 2,787,473 105,362 569,951 24.2% 9,945 57,181 0 $1.

Fremont 20,466,894 380,872 4,180,649 22.3% (122,562) 212,549 0 $0.

TOTAL 31,883,451 541,622 5,702,642 19.6% (52,007) 275,401 0 $0.

*R&D asking rates converted to NNN

Key Sale Transactions Fourth Quarter 2013

PROPERTY SF BUYER CITY SALE TYPE

46723 Lakeview Blvd 86,118 Genmark Automation Fremont Owner/User

5020 Brandin Ct 76,599 Dutra Realty Enterprises Fremont Investor

44217 Nobel Dr 65,332 Synnex Corp Fremont Owner/User

45719 W Northport Loop 22,022 Deanza Tile Fremont Owner/User

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