QUARTERLY REPORT. North I-680 Office Flex First Quarter WALNUT CREEK OFFICE

Transcription

1 QUARTERLY REPORT North I-680 Office Flex First Quarter 2014 WALNUT CREEK OFFICE 1333 N. California Boulevard, Suite 343 Walnut Creek, CA Tel: Fax:

2 Table of Contents Coverage Map... 1 Office Market Overview... 2 Office Market Summary... 3 Office Market Highlights... 4 Historical Office Statistics... 5 Agent Roster... 9 Who We Are The Cornish & Carey Commercial Quarterly Report is based on a quarterly survey of competitive office and flex buildings. The data included in this report incorporates not only space presently available on the market, but also space which we have been led to believe will come onto the market in the foreseeable future. Information contained herein has been given to us by the owner of the property or other sources we deem reliable. We have no reason to doubt its accuracy, but make no guarantee, warranty or representation about it. All information should be verified prior to lease or purchase.

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4 Coverage Map 1

5 North I-680 Market Overview LIGHT AT THE END OF THE TUNNEL? O ver the last twelve quarters, the North I-680 market has felt like the tale of two cities when comparing it to both San Francisco and the Silicon Valley. As the first quarter came to an end, we could finally say, We are not in Kansas anymore. The North I-680 market is gaining momentum. This is most notable in the tenant activity. There were more tenants in the market over the first quarter than all of last year. Tenants seeking space under 5,000 square feet saw significant improvement. While this segment of the market does not necessarily move the vacancy needle in large swings, it does show a trend of local and regional companies gaining confidence. This historically creates a positive effect in all square footage categories. The increased tenant activity has increased Landlord confidence levels. In Walnut Creek, some Class A Landlords raised asking rents 10%-15% from the second quarter of last year. As history has shown, rent growth starts in the Downtown Walnut Creek/Pleasant Hill BART Class A markets and works its way out to Concord, Pleasant Hill and the Shadelands. STATISTICAL OVERVIEW In significant sales news, Montgomery Advisors acquired Corporate Centre ( Willow Pass Road) consisting of approximately 347,439 RSF. The project was approximately 80% lease at the time of acquisition. Other sales include Prosper Holdings LLC acquisition of Civic Court in Concord for a total of 64,266 SF and Easy Place LLC s acquisition of N. Wiget Lane a 56,000 SF project in Walnut Creek Shadelands. OUTSTANDING QUESTIONS As we look forward to the remainder of 2014, we ask ourselves the following key questions. Will tenant activity continue to flourish as it has over the past 6 months? Will the out of market activity continue to increase? Will we see positive absorption, or will same large block vacancies make up the majority of our market vacancy? Will Walnut Creek Landlords be successful in pushing rents in turn improving activity in Concord/Pleasant Hill as Tenants attempt to escape the rising rents? These questions remain to be seen but are key to a successful For the first quarter we saw positive absorption of 3,094 SF. The Vacancy Rate (including sublease space) is 18.44%, which has remained flat since the year-end Notable new vacancies include approximately 25,000 SF at 500 Ygnacio (Enernoc Space),12,817 SF at 3000 Oak Road (Hoffmann Company), 16,317 SF at 1350 Treat Blvd. (Great American Life), 23,064 SF at 1855 Gateway (L1 Boimetrics), and 19,301 SF at 401 Lennon Lane (Securitas). A number of these spaces will add to an already large inventory of big block space that exists in the marketplace. As we have stated in the past, there have not been this many large block opportunities in 20 years. Offsetting the new vacancies were larger leases completed consisting of: AmTrust Financial leasing 24,408 SF at 1655 Grant Street in Concord; Del Monte Foods leasing 27,663 SF at 3003 Oak Road, at the Pleasant Hill BART Station; Accelerys leasing 20,164 SF at 3480 Buskirk in Pleasant Hill; Old Republic Title leasing 10,787 SF at 1855 Gateway in Concord; and Legacy Insurance leasing 9,620 SF at 1850 Mt. Diablo Blvd in Walnut Creek Downtown. 2

6 Office Market Summary Class Number of Buildings Rentable SF Vacancy Rate % Direct Vacancy Rate % Available SF Direct Available SF Sub-Lease Available SF Absorption 1 st Quarter Absorption 2014 Initial Asking Rental Rates Concord A 16 3,808, % 19.55% 822, ,712 77,913 20,002 20,002 $ B , % 20.76% 187, ,497 8,697 15,675 15,675 $ C , % 22.69% 158, , ,693 23,693 $ Office Flex* 31 1,089, % 21.50% 234, , ,107 1,107 $ Concord 109 6,454, % 20.38% 1,402,271 1,315,661 86,610 60,477 60,477 $ Pleasant Hill A 4 381, % 26.23% 99,974 99, ,919 11,919 $ B , % 2.64% 12,868 12, $ C , % 11.32% 36,855 36, ,580 1,580 $ Pleasant Hill Other 36 1,193, % 12.54% 149, , ,616 13,616 $ Pleasant Hill BART A ,754, % 12.25% 257, ,838 43,153 (11,289) (11,289) $ B 5 157, % 11.37% 17,899 17,899 0 (1,555) (1,555) $ Pleasant Hill BART 16 1,911, % 12.18% 275, ,737 43,153 (12,844) (12,844) $ Walnut Creek BART A 12 1,758, % 13.80% 304, ,573 62, $ B 7 150, % 6.49% 10,879 9,792 1,087 3,141 3,141 $ Walnut Creek BART 19 1,909, % 13.22% 315, ,365 63,229 3,991 3,991 $ Walnut Creek Downtown A 12 1,156, % 11.23% 141, ,815 11,411 6,097 6,097 $ B , % 12.89% 120, ,160 1,550 3,788 3,788 $ C , % 11.77% 79,489 77,539 1,950 (866) (866) $ Walnut Creek Downtown 83 2,739, % 11.92% 341, ,514 14,911 9,019 9,019 $ Walnut Creek Shadelands A , % 34.07% 237, ,186 0 (1,466) (1,466) $ B 41 1,085, % 20.83% 232, ,084 5,948 (36,203) (36,203) $ C , % 13.74% 31,994 31,994 0 (547) (547) $ Office Flex , % 32.19% 210, ,611 0 (4,435) (4,435) $ Walnut Creek Shadelands 78 2,668, % 26.45% 711, ,875 5,948 (42,651) (42,651) $ Lafayette/Moraga/Orinda A , % 7.74% 36,292 36, ,081 1,081 $ B , % 13.48% 93,512 81,646 11,866 (29,082) (29,082) $ C 8 104, % 2.96% 3,091 3,091 0 (513) (513) $ Lafayette/Moraga/Orinda 75 1,178, % 10.27% 132, ,029 11,866 (28,514) (28,514) $ N. I-680 Market includes Walnut Creek BART, Walnut Creek Downtown, Walnut Creek Shadelands, Pleasant Hill BART, Pleasant Hill, Concord and Lafayette/Moraga/Orinda Class A 82 10,023, % 17.01% 1,900,009 1,705, ,619 27,194 27,194 $ Class B 184 4,270, % 15.13% 675, ,946 29,148 (44,119) (44,119) $ Class C 105 2,018, % 15.24% 309, ,533 1,950 23,347 23,347 $ Office Flex* 45 1,744, % 25.51% 445, ,009 0 (3,328) (3,328) $ Report s ,055, % 17.19% 3,329,595 3,103, ,717 3,094 3,094 $ Office Flex rental rates are quoted on a NNN basis. All other rental rates are quoted on a Fully Serviced basis. 2 In Q the total inventory was reduced by 10,829 RSF due to remeasurement of 1450 Treat Blvd. as part of John Muir full building lease. 3 In Q the total inventory was reduced by 137,647 RSF due to demolition of 141 N. Civic Drive and 1500 Newell Avenue. 4 In Q the total inventory was increased by 41,109 RSF due to addition of 2 Theater Square to the base inventory. Note: Owner-User properties included in the Rentable Square Footage and the Direct and Vacancy Rates. Concord: 550,360 SF Pleasant Hill: 274,230 SF Pleasant Hill BART: 483,000 SF Walnut Creek Downtown: 100,000 SF Walnut Creek Shadelands: 436,700 SF 3

7 Office Market Highlights Significant First Quarter 2014Lease Transactions Tenant Landlord/Sublessor Address Submarket Size (SF) Del Monte Food PMI 3003 Oak Road Pleasant Hill BART 27,663 AmTrust Financial Swift Real Estate Group 1655 Grant Street Concord 24,408 Accelrys True North Management Group 3480 Buskirk Avenue Pleasant Hill 20,164 Old Republic Title Sierra Pacific Properties Inc Gateway Blvd. Concord 10,787 Legacy Insurance Sierra Pacific Properties Inc Mt. Diablo Blvd. Downtown Walnut Creek 9,620 Buchman Provine Brothers Smith LLP Archer Norris 2033 N. Main Street Walnut Creek BART (S) 8,303 Systems Integrated Solutions Metropolitan Life Insurance Co Treat Blvd. Pleasant Hill BART (R)(E) 8,057 Great American Insurance Metropolitan Life Insurance Co Treat Blvd. Pleasant Hill BART 7,427 (R) = Renewal (E) = Expansion (S) = Sublease Significant First Quarter 2014Sale Transactions Buyer Seller Address Submarket Size (SF) Montgomery Advisors Westcore Core/American Realty Willow Pass Rd. Concord 347,439 Prosper Holdings LLC NUCP Fund 1 LLC Enea Circle Concord 64,266 Easy Place LLC M & A Gabaee N. Wiget Lane Shadelands 56,400 Mark & Andrew O Brien Solomon Family Trust 2055 N. Broadway Downtown Walnut Creek 11,818 Corporate Centre, Concord Montgomery Advisors purchased Corporate Centre, a Class A office project in Concord. The approximately 345,000 RSF, 2-Building Office sale closed in late March. Swift Plaza, Concord Amtrust relocated and consolidated offices in San Francisco and San Ramon to 24,408 SF at Swift Plaza, 1655 Grant Street, in Concord. Hookston Square, Pleasant Hill Accelrys relocated and consolidated offices in San Ramon and Fairfield into 20,164 RSF at Hookston Square, 3480 Buskirk Avenue, in Pleasant Hill. 4

8 Historical Office Market Statistics Historical Vacancy Rates (%) Submarket Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Concord 19.42% 19.37% 19.30% 22.95% 23.57% 21.39% 22.00% 20.87% 20.33% 20.55% 18.76% 21.90% 22.67% 21.73% Pleasant Hill 11.29% 10.53% 10.59% 11.22% 11.23% 11.51% 11.88% 12.18% 10.28% 10.06% 13.52% 13.98% 13.68% 12.54% Pleasant Hill BART 26.18% 24.93% 22.52% 21.48% 20.92% 20.57% 12.35% 11.98% 13.32% 14.70% 14.84% 15.56% 13.76% 14.43% Walnut Creek BART 17.69% 20.19% 18.16% 17.19% 17.12% 17.91% 17.93% 16.93% 15.61% 16.89% 16.92% 16.02% 16.74% 16.53% Walnut Creek Downtown 20.95% 20.13% 18.42% 18.21% 18.96% 18.44% 18.43% 17.22% 14.55% 13.59% 13.96% 13.39% 12.79% 12.46% Walnut Creek Shadelands 22.91% 23.56% 22.88% 24.80% 23.59% 26.42% 26.89% 26.67% 24.00% 27.56% 27.21% 26.16% 25.07% 26.67% Lamorinda 9.28% 9.45% 8.77% 8.63% 9.86% 10.06% 10.00% 8.81% 8.62% 8.94% 10.38% 10.67% 8.52% 11.27% Overall North I % 19.58% 18.68% 20.04% 20.21% 19.85% 19.29% 18.46% 17.35% 18.09% 17.80% 18.71% 18.46% 18.44% Historical Vacancy Rates (%) 5

9 Historical Office Market Statistics Historical Net Absorption (SF) All Classes Submarket Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Concord 35,199 3,473 4,398 (235,538) (45,942) 140,762 (39,269) 72,953 34,718 (14,315) 115,626 (202,540) (49.940) 60,477 Pleasant Hill 10,033 9,008 (680) (7,548) (162) (3,302) (7,577) (3,609) 22,659 2,627 (41,279) (5,439) 3,545 13,616 Pleasant Hill BART (25,653) 24,051 46,404 1,991 10,756 6, ,503 7,030 (25,578) (26,315) (2,694) (13,909) 34,469 (12,844) Walnut Creek BART 13,837 (47,717) 38,790 18,435 1,439 (15,173) (356) 19,070 25,231 (24,507) 2,846 17,236 (13,714) 3,991 Walnut Creek Downtown 12,943 24,073 49,507 6,065 (21,731) 15, ,344 14,254 26,432 (10,334) 15,723 16,375 9,019 Walnut Creek Shadelands (12,083) (17,459) 18,138 (51,236) 32,456 (75,537) 8,840 5,039 73,761 (82,119) 9,692 28,113 28,866 (42,651) Lamorinda (4,589) (1,863) 7,651 1,612 (14,000) (2,265) ,462 2,203 (3,602) (16,452) (3,241) 16,977 (28,514) 29,687 (6,434) 164,208 (248,219) (37,184) 66, , , ,248 (121,799) 57,405 (164,057) 36,578 3,094 Historical Net Absorption (SF) All Classes 6

10 Historical Office Market Statistics Downtown Walnut Creek/Walnut Creek BART/Pleasant Hill BART Period Rentable SF Vacancy Rate % Available SF Direct Available SF Sublease Available SF Annual Absorption Median Rental Rate Q ,560, % 932, , ,293 $3.08 Q ,560, % 933, , ,550 21,608 $3.08 Q ,560, % 989, ,456 58,799 $3.08 Q ,560, % 951, ,585 42, ,418 $2.93 Q ,727, % 1,114,211 1,209,046 85,165 $2.61 Q ,738, % 1,280,107 1,177, , ,063 $2.59 Q ,738, % 1,315,062 1,185, ,202 $2.53 Q ,738, % 1,450,170 1,376,986 73,184 47,565 $2.53 Q ,738, % 1,509,729 1,415,293 94,436 $2.60 Q ,738, % 1,480,814 1,321, ,518 (128,374) $2.71 Q ,483, % 1,261,894 1,150, ,535 $2.76 Q ,483, % 1,093, , ,364 (318,083) $2.90 Q ,483, % 885, ,138 83,842 $3.03 Q ,483, % 789, ,041 53, ,516 $3.05 Q ,533, % 804, ,408 89,800 $2.97 Q ,533, % 907, , ,023 (147,393) $2.79 Q ,533, % 836, , ,902 $2.82 Q ,533, % 759, , ,131 91,495 $2.68 Q ,561, % 781, , ,690 $2.67 Q ,561, % 877, , ,546 33,247 $2.52 Q ,561, % 1,048, , ,173 $2.60 Q ,561, % 903, , ,318 (31,474) $2.66 Q ,561, % 835, , ,423 $2.70 Q ,561, % 876, , ,008 (81,542) $2.80 Median Rental Rate ($/SF/Month) vs. Vacancy Rate (%) 7

11 Historical Office Market Statistics Concord/Pleasant Hill/Walnut Creek Shadelands Period Rentable SF Vacancy Rate % Available SF Direct Available SF Sublease Available SF Annual Absorption Median Rental Rate Q ,317, % 2,269,791 2,171,233 92,558 $2.01 Q ,317, % 2,295,975 2,186, ,265 (207,163) $1.94 Q ,317, % 2,098,580 1,915, ,043 $1.94 Q ,317, % 2,075,516 1,951, , ,438 $1.93 Q ,317, % 2,279,444 2,060, ,892 $1.88 Q ,317, % 2,285,044 2,121, ,021 (291,092) $1.88 Q ,317, % 1,982,794 1,785, ,098 $1.89 Q ,317, % 1,999,672 1,837, ,977 (225,595) $1.89 Q ,317, % 1,921,235 1,739, ,792 $1.96 Q ,317, % 1,777,477 1,560, ,405 (455,817) $1.98 Q ,317, % 1,475,593 1,339, ,733 $2.02 Q ,298, % 1,315,566 1,161, ,933 (76,007) $2.00 Q ,298, % 1,166,744 1,064, ,393 $2.13 Q ,298, % 1,239,553 1,094, ,784 (228,265) $2.26 Q ,280, % 1,052, , ,816 $2.21 Q ,280, % 1,011, , , ,843 $2.13 Q ,280, % 1,005, ,873 96,068 $2.08 Q ,412, % 1,175,695 1,018, ,376 (53,353) $1.98 Q ,412, % 1,310,183 1,103, ,264 $1.97 Q ,412, % 1,121, , ,148 62,171 $1.93 Q ,412, % 1,210, , ,842 $1.95 Q ,412, % 1,187, , ,054 (95,326) $2.02 Q ,398, % 1,153, , ,874 $2.09 Q ,398, % 1,056, , , ,428 $2.09 Median Rental Rate ($/SF/Month) vs. Vacancy Rate (%) 8

12 Agent Roster Walnut Creek Office 1333 N. California Boulevard, Suite 343 Walnut Creek, CA Tel: Fax: Mark McNally Senior Patrick Reilly Investment Division Sean Cooley Senior Industrial Division Graden Travis Senior Retail Division Gwen White Danielle Bromstead Fernando Cuebas Senior Associate Trent Calder Associate Office Division Breck Lutz Senior Rick Steffens Senior Curtis Berrien Julaine Johnson Associate Mike Zylstra Tyler Epting Cece Vohs Cimino Adria Giacomelli Stephen Rusher Senior Associate Tom Fehr Sr. & Managing Director Alex Grell Senior Knute Bucklew Forrest Gherlone Jeff Fritch Associate Keith Marr Jim Shepherd Meghan Centerwall Basso Associate Staff Zachary LeBeouf Market Research Coordinator

13 NORTHERN CALIFORNIA EXPERTISE W I T H I N A D Y N A M I C G L O B A L P L A T F O R M A Global Leader in Commercial Real Estate Newmark Grubb Knight Frank is one of the world's leading commercial real estate advisory firms. We provide a fully integrated platform of services to prominent multinational corporations and institutional investors across the globe, as well as to owners and users of real estate on a local, regional and national level. Headquartered in New York, Newmark Grubb Knight Frank and Londonbased partner Knight Frank operate from more than 340 offices in established and emerging property markets on five continents. Our global platform enables us to effectively serve the property requirements of tenants, landlords, investors and developers worldwide. Strategic Thinking, Effective Execution Newmark Grubb Knight Frank's integrated services platform provides clients with a single-source solution for every phase of occupying or owning a property - from strategic planning, site selection, design, construction and initial occupancy to ongoing cost-effective operations and dispositions. Taking a consultative approach and leveraging our global reach, we assist corporations, investors and owners in effectively managing real estate operations and portfolios, creating and executing long and short term strategic plans that deliver reduced occupancy costs, increased efficiency and, ultimately, maximized value. Our full range of services includes leasing advisory, global corporate services, investment sales and financial services, property and facilities management, program and project management, consulting, and appraisal and valuation services. 10

14 SANTA ROSA OFFICE Tel: Fax: SAN RAFAEL OFFICE Tel: Fax: EMERYVILLE OFFICE Tel: Fax: SAN FRANCISCO OFFICE Tel: Fax: HAYWARD OFFICE Tel: Fax: PLEASANTON OFFICE Tel: Fax: ROSEVILLE OFFICE Tel: Fax: SANTA CLARA OFFICE Tel: Fax: PALO ALTO OFFICE Tel: Fax: SAN MATEO OFFICE Tel: Fax: LEASED INVESTMENT GROUP Tel: Fax: SACRAMENTO OFFICE Tel: Fax: WALNUT CREEK OFFICE Tel: Fax: