Third Quarter 011 Tri-Valley Office Flex PLEASANTON OFFICE 4305 Hacienda Drive, Suite 300 Pleasanton, CA 94588 Tel: 95.467.0900 Fax: 95.467.0911 www.ccareynkf.com
TABLE OF CONTENTS Coverage Map 1 Market Overview Office Market Summary 4 Office Market Statistics 5 Agent Roster 7 The Cornish & Carey Commercial Newmark Knight Frank Tri-Valley 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.
COVERAGE MAP 1
TRI-VALLEY MARKET OVERVIEW Statistical Overview S tatistically, the Tri-Valley Market experienced its sixth consecutive quarter of positive absorption of ±173,884 Rentable Square Feet ( RSF ). This brings 011 year-to-date absorption to a positive ±98,549 RSF and the overall market vacancy rate to 17.7%, the lowest it has been since the Third Quarter of 008. The Class A market was the biggest beneficiary of the absorption with ±117,537 RSF of positive absorption; specifically attributed to lease transactions in Dublin, Pleasanton, and San Ramon. Vacancy in the Tri-Valley s Class B market segment dropped to 4.3%, its lowest in 10 quarters. However, with the exception of one large deal in Livermore (±81,560 RSF) this segment has continued to struggle as a result of companies choosing flight to quality alternatives for a comparable cost. Leasing Activity Leasing activity continued to remain steady in some categories and slow in others. Generally speaking, the summer was very slow for small and mid-sized companies under 30,000 RSF. However, there were multiple large tenants finalizing deals and exploring the market through the quarter. Most notably, General Electric is rumored to be considering a large block of space, up to ±150,000 RSF, in Bishop Ranch 3 with a growth plan for the entire building a total of ±33,000 square feet. The 33,000 RSF building, located at 63 Camino Ramon, was previously occupied by AT&T. In West Livermore, 4 Hour Fitness finalized a lease transaction at 650 Kitty Hawk; a building formerly occupied by AAA as a call center. This lease transaction commenced shortly after AAA sold the building to Livermore Oaks LP. In addition to these two deals, there are a notable number of active tenant requirements and market inquiries for large requirements in predominantly Class A product type with office/flex gaining a bit of momentum. The influx of large user activity has had a positive impact on the Class A market resulting in many building owners holding firm on rents and a few owners raising rents. Specifically, UBS has raised asking rents at Pleasanton Corporate Commons to $.00/RSF per month, and Sunset Development (Bishop Ranch) has decreased the amount of free rent offered for new transactions. Additionally, many of these owners are generally changing their stance on deal-making parameters, placing more of an emphasis on credit, less free rent, fewer tenant improvement dollars, and higher rental increases. Smaller tenant activity was much less active through the summer. However, since Labor Day, there has been a significant uptick in activity from small and mid-sized users. While there continues to be a large number of small spaces available in the market, the increase in touring is a welcome relief to many others competing for deals less than 10,000 RSF. Sales Activity The largest sale in the third quarter was the sale of 650 Kitty Hawk in Livermore. The ±81,560 RSF building traded for ±$79.95/RSF and was subsequently leased to 4 Hour Fitness. There were no other large sales in the quarter, though Ellis Partners is rumored to be in escrow with a user at 480 Hacienda Drive, a two-story office/r&d building acquired in 010. There will be a few projects coming to market in the Fourth Quarter. Clorox will be marketing their campus on Johnson Drive in Pleasanton. The facility, which Clorox will be vacating once their improvements are completed at the former Washington Mutual campus, contains 10 industrial and R&D buildings on 5.9 acres of land. Additionally, three of Britannia Business Center s R&D buildings, in the Hacienda Business Park, will be coming to market as a result of foreclosure. Interestingly the supply of smaller owner/user buildings for sale has dwindled to approximately half of what was available 1 months ago. However, the reduction of supply has been accompanied by a drastic drop in demand, resulting in a decline in pricing over the course of the year. While there have been a handful of small sales throughout the quarter, the number of buyers seems very limited.
Lease Availability Index The Lease Availability Index continued its slow decline as a result of another quarter of positive absorption; it is the lowest level since when we began tracking this subset of data in Q1 of 009. Looking Forward With the anticipation of at least one large transaction finalizing in the Tri-Valley, we foresee 011 coming to a close with more positive absorption and trending towards a slowly improving market. 3
OFFICE MARKET SUMMARY Danville/Alamo Class Number of Buildings Total Rentable SF Total Vacancy Rate% Direct Vacancy Rate % Total Available SF Direct Available SF Sublease Available SF Absorption Absorption 3 rd Quarter 011 Total 1 Initial Rental Rates A 9 10,884 19.07% 17.17% 40,10 36,07 4,003 (4,160) (3,105) $1.95-3.00 B 49 733,56 14.17% 14.17% 103,883 103,883 0 (4,538) 4,33 $1.65-.00 C 17 160,787 10.81% 10.81% 17,375 17,375 0 1,593 (3,499) $1.60-1.95 Danville/Alamo Total 75 1,104,97 14.61% 14.5% 161,468 157,465 4,003 (7,105) (,371) Bishop Ranch A 4 7,15,43 1.3% 10.17% 881,131 77,708 153,43 (1,515) 15,853 $1.70-.33 B 11 608,991 13.44% 13.5% 81,875 80,675 1,00 8,160 41,001 $1.50-1.67 Office Flex 43,177 6.90% 6.90% 16,77 16,77 0 0 0 $0.90 Bishop Ranch Total 37 8,004,591 1.4% 10.31% 979,778 85,155 154,63 (4,355) 56,854 San Ramon A 16 940,15 4.9% 4.46% 34,69 9,986 4,83 3,067,950 $1.55-1.80 B 795,609 10.71% 10.59% 85,191 84,7 919 (9,43) (8,139) $1.45-1.65 C 33 37,974 13.40% 1.47% 43,96 40,91 3,050 5,461 (10,401) $1.15-1.50 San Ramon Total 71,063,735 17.61% 17.1% 363,4 355,170 8,5 8,096 (15,644) Dublin A 11 1,496,419 1.36% 1.36% 184,944 184,944 0 63,081 136,478 $1.60-1.90 B 14 559,88 3.58% 4.18% 18,393 135,358 47,035 (4,745) (47,888) $1.30-1.55 C 19 86,858 7.98% 7.98% 80,69 80,69 0 (7,784) (16,56) $1.10-1.45 Office Flex 6 866,689 1.06% 9.84% 104,48 85,60 19, (17,789) 17,54 $0.70-1.00 Dublin Total 70 3,09,794 17.0% 15.14% 55,088 485,831 66,57 (5,37) 89,588 Pleasanton A 61 7,160,104 16.57% 16.10% 1,186,689 1,15,45 34,64 39,064 56,711 $1.55-1.95 B 57,91,80 5.50% 5.39% 584,40 581,884,518 8,536 43,956 $1.35-1.70 C 9 619,647 10.% 10.13% 63,38 6,777 551 (7,51) 7,860 $1.45-1.70 Office Flex 96 3,145,38 3.94%.85% 753,076 718,680 34,396 (1,89) (1,17) $0.70-1.15 Pleasanton Total 43 13,16,881 19.58% 19.03%,587,495,515,766 71,79 58,799 96,310 Livermore A/B 36 907,675 43.68% 41.6% 396,457 377,744 18,713 77,583 (69,647) $1.50-1.75 C 4 14,949 1.55% 1.55% 17,939 17,939 0 0 0 $0.90-1.50 Office Flex 69,76,114 18.33% 18.5% 499,790 497,484,306 46,103 143,459 $0.65-0.95 Livermore Total 108 3,776,738 4.1% 3.65% 914,186 893,167 1,019 13,686 73,81 Tri-Valley Market includes Danville/Alamo, Bishop Ranch, San Ramon, Pleasanton, Dublin and Livermore Class A 11 16,959,98 14.90% 13.75%,57,43,331,70 195,973 117,537 8,887 $1.50-3.00 Class B 188 5,897,161 4.3% 3.13% 1,434,01 1,363,816 70,385 57,564 (56,538) $1.30-.00 Class C 10 1,538,15 14.49% 14.5%,873 19,7 3,601 (8,4) (,96) $0.90-1.95 Office Flex D 193 6,981,308 19.68% 18.88% 1,374,10 1,318,196 55,94 7,05 148,496 $0.65-1.15 Report Totals 604 31,376,666 17.7% 16.68% 5,558,437 5,3,554 35,883 173,884 98,549 1 The Initial Rental Rate range is the first year s starting rate for direct space. Office Flex rental rates are quoted on a NNN basis. All other rental rates are quoted on a Fully Serviced basis. 3 Owner-User properties included in the Total Rentable Square Footage and the Direct and Total Vacancy Rates. Bishop Ranch: 3,,000 SF San Ramon: 34,400 SF Dublin: 18,000 SF Pleasanton: 3,615,680 SF Livermore: 387,391 SF 4
HISTORICAL OFFICE MARKET STATISTICS Historical Vacancy Rates (%) Submarket Q 06 Q4 06 Q 07 Q4 07 Q 08 Q4 08 Q 09 Q4 09 Q 10 Q4 10 Q 11 Q3 11 Danville/Alamo 7.0% 7.33% 6.55% 8.65% 10.55% 14.16% 14.43% 17.9% 1.9% 13.9% 13.97% 14.61% Bishop Ranch 13.66% 11.8% 13.09% 13.7% 9.0% 10.96% 9.4% 9.98% 9.9% 1.95% 1.19% 1.4% San Ramon 9.50% 10.45% 15.65% 19.13% 17.79%.51%.41%.37% 18.8% 16.06% 18.97% 17.61% Dublin 16.1% 14.41% 13.11% 16.74% 18.75% 19.09% 18.70% 19.8% 1.3% 19.99% 16.41% 17.0% Pleasanton 13.98% 13.18% 13.31% 15.00% 18.9% 1.10% 1.61% 5.34% 4.67% 0.61% 0.5% 19.58% Livermore 5.7% 6.84% 30.15%.87% 0.0% 4.94% 6.46% 30.40% 31.78% 6.16% 7.48% 4.1% Total 15.1% 14.50% 15.5% 15.48% 16.8% 18.38% 18.75% 1.4% 0.63% 18.71% 18.36% 17.7% Historical Class A Asking Rates ($/SF/Month) Submarket Q 06 Q4 06 Q 07 Q4 07 Q 08 Q4 08 Q 09 Q4 09 Q 10 Q4 10 Q 11 Q3 11 Danville/Alamo $3.05 $.88 $.75 $.75 $.80 $.63 $.63 $.48 $.48 $.48 $.48 $.48 Bishop Ranch $.1 $.34 $.34 $.34 $.34 $.1 $1.9 $1.79 $1.79 $1.9 $1.9 $1.9 San Ramon $.05 $.08 $.10 $.18 $.08 $1.95 $1.80 $1.75 $1.75 $1.70 $1.68 $1.68 Dublin $.13 $.13 $.3 $.40 $.10 $.10 $1.90 $1.75 $1.75 $1.75 $1.75 $1.75 Pleasanton $.10 $.5 $.30 $.40 $.0 $.10 $1.75 $1.73 $1.73 $1.73 $1.75 $1.75 Livermore* $1.70 $1.15 $.15 $1.88 $1.95 $1.75 $1.63 $1.63 $1.63 $1.63 $1.63 $1.63 Average $.11 $.6 $.9 $.31 $.0 $.09 $1.83 $1.76 $1.76 $1.79 $1.80 $1.8 *Livermore Rates are Class B. Tri-Valley Total Vacancy Rates v. Class A Asking Rates Second Quarter 006 Third Quarter 011 5.00% $.50 0.00% $.00 15.00% $1.50 10.00% $1.00 5.00% $0.50 0.00% Q '06 Q4 '06 Q '07 Q4 '07 Q '08 Q4 '08 Q '09 Q4 '09 Q '10 Q4 '10 Q'11 Q3'11 Tri-Valley Total Vacancy Rates Class A Asking Rates $0.00 5
HISTORICAL OFFICE MARKET STATISTICS Historical Net Absorption (SF) Total All Classes Submarket Q1 09 Q 09 Q3 09 Q4 09 Q1 10 Q 10 Q3 10 Q4 10 Q1 11 Q 11 Q3 11 Danville/Alamo 98 (6,50) (5,517) (5,53) 30,1 16,88 (101) (3,957) 9,16 (4,39) (7,105) Bishop Ranch (30,79) 171,5 (53,94) (4,997) (46) 4,960 (70,067) (17,463) 6,487 54,7 (4,355) San Ramon (7,309) 6,991 (5,367) 6,36 1,706 71,630 3,818 33,161 (,15) (1,588) 8,096 Dublin (411) 1,968 (110,43) 84,556 (39,49) (3,403),660 14,131 6,785 108,040 (5,37) Pleasanton (47,80) (98,706) (93,073) (158,169) 3,939 14,035 78,861 56,690 4,0 (4,511) 58,799 Livermore 3,93 (15,986) (1,78) (86,433) 3,14 (54,067) 151,176 61,040 47,513 (97,387) 13,686 Average Tri-Valley (81,76) (66,713) (481,086) (04,060) (856) 178,037 406,347 188,60 89,781 34,884 173,884 Tri-Valley Total Net Absorption First Quarter 009 Third Quarter 011 500,000 400,000 406,347 300,000 00,000 178,037 188,60 173,884 Square Feet 100,000 0 (100,000) (81,76) (856) 89,781 34,884 (00,000) (300,000) (400,000) (66,713) (04,060) (500,000) (481,086) Q1 '09 Q '09 Q3 '09 Q4 '09 Q1 '10 Q '10 Q3 '10 Q4 '10 Q1 '11 Q '11 Q3 '11 6
AGENT ROSTER PLEASANTON OFFICE OFFICE BROKERAGE CLIENT SOLUTIONS 4305 Hacienda Drive, Suite 300 Pleasanton, CA 94588 Tel: 95.467.0900 Fax: 95.467.0911 www.ccareynkf.com STAFF Meghan Basso Market Research Coordinator 95.974.0117 mbasso@ccareynkf.com Dave Praklet Market Research Coordinator 95. 460.994 dpraklet@ccareynkf.com Paul Sheehan Senior Vice President / Sales Manager 95.467.090 psheehan@ccareynkf.com Jim Peterson Senior Vice President 95.467.0904 jpeterson@ccareynkf.com Marcy Place Senior Vice President 95.467.0906 mplace@ccareynkf.com Jeff Morgenstern Vice President 95.467.0905 jmorgenstern@ccareynkf.com Dave Bruzzone Vice President 95.467.0910 dbruzzone@ccareynkf.com Dan Watson Sales Associate 95.467.0903 dwatson@ccareynkf.com Andrew Zink Sales Associate 95.467.0907 azink@ccareynkf.com Richard Hoyt Sales Associate 95.460.99 rhoyt@ccareynkf.com Tom Fehr Senior Vice President / Sales Manager 95.974.04 tfehr@ccareynkf.com Chip Wiser Senior Vice President 95.460.1011 chip@ccareynkf.com SPECIAL PROJECTS Mark Sweeney Senior Vice President 95.460.101 mark.sweeney@ccareynkf.com INVESTMENT SERVICES Sean Cooley Senior Vice President 95.974.0107 scooley@ccareynkf.com Mike Zylstra Vice President 95.974.0106 mzylstra@ccareynkf.com Forrest Gherlone Vice President 95.974.037 fgherlone@ccareynkf.com 7
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