Industrial Market Review

Transcription

1 Q Industrial Oakland California research & forecast Report Industrial Market Review The I-80/I-880 Corridor industrial market was flat in the second quarter of. Activity level across product lines remains steady with several large credit tenants in the market. We expect that many lease transactions in the pipeline which were previously slated for the second quarter will be completed early in the third quarter. Based on activity levels and current inventory, we expect to see very robust third and fourth quarters in leasing and sales volume, as well as positive net absorption and a strengthening market in terms of price and vacancy trends. market indicators Projected Q- Q- VACANCY NET ABSORPTION construction rental rate Selected Market Statistics Market-wide vacancy along all products lines, warehouse/distribution, light industrial, and R&D/Flex, increased marginally in the first quarter to 8.9 percent from 8.8 percent in the first quarter. The Oakland and Leandro submarkets remain extremely tight in both light industrial and warehouse/ distribution product with vacancy rates well below 0.0 percent. Also notable, the light industrial market ticked down to 8.6 percent from 9. percent in the past quarter. Sales remain brisk as users and investors alike are able to find high quality assets at cyclical low prices and extremely attractive financing terms. Several larger portfolio transactions being marketed are attracting tremendous investor interest a very good sign that the I-80/I-880 Corridor industrial market remains healthy with positive outlook for rent growth in future quarters. The election year politics promise to make the third and fourth quarters very interesting. The I-80/I-880 Corridor industrial market should continue to outperform other Northern California submarkets and benefit from tech industry growth and high-end manufacturing sector growth. As retail sales continue to beat analyst expectations, we expect that third party logistics companies will begin to expand in the third and fourth quarters to gear up for retail season. > > Year-to-date gross absorption is,, square feet > > Vacancy this quarter was 9.0 percent compared to 8.8 percent last quarter > > Year to date net absorption is,96 square feet > > Alameda County s unemployment rate is 9. percent as of May Vacancy Vs. Asking Full Service Rental Rates i-80/i-880 corridor overall industrial market $0. Though the market has been flat through the first half of, we expect a major pickup in activity in the second half of the year. * Source: California Employment Development Department Vacancy Rate Average Asking Rent

2 research & forecast report Q Industrial Richmond Richmond Hercules, Pinole, Richmond, Pablo, El Cerrito Oakland Leandro Leandro, Lorenzo The Richmond industrial market has seen a very slight increase in vacancy since the outset of the year from. to.8 percent overall. No new large blocks of space have come onto the market this past quarter. Light industrial vacancy is presently 7. percent, up from 6.8 percent. Warehouse/distribution vacancy is. percent, up from. percent. R&D/Flex vacancy has increased to. percent from 7. percent. We expect vacancy to decrease slightly during the second half of the year as we are beginning to see greater demand with several large users presently looking for space in the Richmond market. Rates have decreased slightly over the first half of the year to $0.9 NNN psf/mo from $0. NNN psf/mo. Warehouse/distribution rates have remained flat at $0.7 NNN psf/mo. R&D/ Flex rates have increased to $0.8 from $0.7 NNN psf/mo. Richmond contains a mix of both newer product, as well as older, lower quality product. There is a large difference in pricing between the two. Rates on newer, higher quality product is beginning to trend upwards while rates on lower quality product remain low. Despite nearly flat vacancy rates, activity is beginning to pick up in Richmond. Nutiva subleased 0,000 square feet of warehouse/ distribution space at West Cutting Boulevard. Construction has commenced on a 7,00 square foot build-to-suit at Building in the Pinole Point Business Park. Whole Foods will occupy the space upon completion. Based on rising demand for space, activity should continue to increase in the second half of the year. Lawrence Berkeley National Lab has chosen Richmond over several other locations as the site of its new campus. They plan to construct,000,000 square feet on the 70 acre UC Berkeley Field Station site. The anticipated completion date for this project is W. Cutting Boulevard, Oakland > W. Cutting Boulevard, Richmond June 0,000 Nutiva Warehouse/Distribution - W. Cutting Boulevard, Richmond June,00 Sasol Wax N.A. Warehouse/Distribution Regatta Boulevard, Richmond April 8,000 Del Monte Fresh Warehouse/Distribution sales activity Property Address sale Date Size buyer Type 97 Technology Court, Richmond May 8,600 Accurate Development, LLC R&D/Flex richmond warehouse/distribution richmond light industrial richmond r&d/flex $.0 $.00 $0.90 $0.80 $0.70 $0.0 $0.0 Vacancy Rate Average Asking Rent Vacancy Rate Average Asking Rent Vacancy Rate Average Asking Rent p. Colliers International - Oakland

3 research & forecast report Q Industrial Oakland The Oakland industrial submarket remains one of the healthiest in the I-80/I-880 Corridor. Although leasing activity has remained slow and on pace with, the overall vacancy rate ended the first half of at just 6. percent. Light industrial vacancy is.0 percent, down slightly from.7 percent at the start of the year. Warehouse/distribution vacancy was likewise down from 9. percent to 8. percent. We do not expect a significant change in vacancy trends through the end of this year. Despite a few spaces coming onto the market this quarter, the largest of which was 0,880 square feet at 9 Leandro Street, year to date net absorption is positive 89,79 square feet. Year to date gross absorption is less than 00,000 square feet, most of it coming in the second quarter. Notable transactions this quarter include a,7 square foot lease to Dean s Services at 860 8st Avenue; a 60,000 square foot lease to Green Horizon Manufacturing at 0 Buena Vista Avenue in Alameda; and a, square foot lease to Quick Pick at 7 8th Avenue. stable market due to its proximity to the Port, Bridge, and major freeway infrastructure. However, asking rental rates are moderated by higher quality product and a greater variety of options in the neighboring submarkets of Leandro, and. Light industrial product ended the second quarter at NNN psf/mo compared to $0. at the outset of the year, and asking rates for warehouse/distribution product are $0. compared to $0.6 NNN psf/mo. The Oakland City Council recently approved a $ billion Prologis logistics development project to support the Port of Oakland at the former Oakland Army Base. The City will also contribute $. million to the project, and the Port has received a $ million grant to improve rail capacity and access to the planned development. It is expected to create approximately,000 new jobs in the area. We expect this to have a significant future impact directly at the Port and in the overall Oakland submarket as existing companies and new companies require more space to support Port activity. Richmond Hercules, Pinole, Richmond, Pablo, El Cerrito Oakland Leandro Leandro, Lorenzo Rental rates have edged up slightly since the beginning of the year. Despite overall slow economic recovery, this growth can be attributed to Oakland s position as a relatively st Avenue, Oakland May,7 Dean's Services Light Industrial 0 Buena Vista Avenue, Alameda May 60,000 Green Horizon Manufacturing Warehouse/Distribution 7 8 th Avenue, Oakland May, Quick Pick Warehouse/Distribution Vacancy Vs. Asking Full NNN Rental Service Rates Rental Rates Vacancy Vs. Asking Full Service Rental Rates Oakland warehouse/distribution Oakland airport light industrial $0. 7% $0.6 $0. $0. % $0. $0.8 $0.6 $0. % $0.8 $0. $0.6 % $0. $0.8 $0. Vacancy Rate Average Asking Rent Vacancy Rate Average Asking Rent Colliers International - Oakland p.

4 research & forecast report Q Industrial Leandro Richmond Hercules, Pinole, Richmond, Pablo, El Cerrito Oakland Leandro Leandro, Lorenzo The Leandro industrial market fared the second quarter better than its neighboring submarkets with the exception of Oakland. Overall vacancy has decreased in the first half of the year from 7.0 percent to 6. percent, though most of the absorption responsible for this change occurred in the first quarter. Net absorption was slightly negative during the second quarter; however year to date net absorption remains positive at,89 square feet, largely concentrated in the light industrial market. Light industrial vacancy has dropped from 8.8 to 7.8 percent since the beginning of the year. Warehouse/distribution vacancy dropped from. to. percent. R&D/Flex was the only product type that saw an increase in vacancy in Leandro, rising from. to. percent. We anticipate vacancy will rise slightly in the third quarter as North Face vacates their,7 square foot facility at Farallon Drive and moves to their new headquarters at Harbor Business Park in Alameda. Asking rental rates have remained steady at $0. NNN psf/mo since the start of the year. Light industrial rates have increased slightly from to $0.6 NNN psf/mo; warehouse/ distribution rates have decreased from $0. to $0. NNN psf/mo; and R&D/Flex rates have dropped one cent to $0.8 NNN psf/mo. We believe rates will remain at current levels over the next several months while landlords wait for a clear market direction to emerge. Activity remains relatively slow, but is outpacing numbers by nearly 0 percent. The largest lease transaction in the second quarter occurred at 788 Fairway Drive when tos Agency leased,86 square feet of warehouse/ distribution space. Most of the gross absorption for the first half of the year can be accounted for by several smaller leases. Apart from this, the majority of these transactions were existing tenants seeking better space within the Leandro submarket. The most notable investment activity in the first half of occurred at the tail end of the first quarter when Scannell Properties purchased 7,9 square feet at 70-0 Doolittle Drive, a property that had been on the market for over five years, and flipped a,980 square foot portion to WM Spencer. 788 Fairway Drive, Leandro > 788 Fairway Drive, Leandro June,86 tos Agency Warehouse/Distribution 6 Worthley Drive, Lorenzo June,60 URS Corp Light Industrial san leandro warehouse/distribution san leandro light industrial san leandro r&d/flex 7% $0. $.0 $.00 $0.9 % $0.90 $0.8 % $0.80 $0.7 $0.70 % $0.0 $0.6 $0. Vacancy Rate Average Asking Rent Vacancy Rate Average Asking Rent Vacancy Rate Average Asking Rent p. Colliers International - Oakland

5 research & forecast report Q Industrial The industrial market saw a slight increase in vacancy rate over the first half of the year. Overall vacancy went from. percent to.7 percent, though it had dipped to 0. percent at the end of the first quarter. Much of the vacancy increase in the second quarter can be attributed to a flood of sublease space coming onto the market in the warehouse/distribution sector. A total of 7,7 square feet at Arden Road came onto the market for sublease from two different tenants, Mimeo and Syncreon. In addition,,0 square feet became available at 900 West Winton Avenue for sublease. Warehouse/distribution vacancy rose from. to.6 percent since the beginning of the year, and from. percent quarter over quarter. Light industrial vacancy rose from 8. to 9. percent, and R&D/Flex vacancy decreased slightly to. from.0 percent. We anticipate vacancy rates to hold near present levels over the next quarter with some improvement towards the end of the year due largely to a continuing trend of a flight to value. Peninsula tenants consider the and submarkets because of the quality product and greater selection at relatively lower cost. product seems to be stabilizing. Light industrial rates are $0.9 compared to $0.8 NNN psf/mo at the end of last year; warehouse/distribution rates are presently $0.9 compared to $0.8 NNN psf/mo; and R&D/Flex rates are $0.68 compared to $0.7 NNN psf/mo. We predict some improvement in rental rates towards the end of the year, largely contingent upon a decrease in the underlying vacancy rate. Similar to the overall market, gross absorption was largely composed of several smaller deals with no large significant transactions. The exception was Win Woo Trading, LLC s purchase of 08,0 square feet of warehouse/ distribution space at 06 Genstar Road. The only other notable transaction of the quarter was Londo Trucking s purchase of a,07 square foot Class A warehouse/distribution building at 8-87 Clawiter Road. Several larger users are in the market looking to lease space greater than 00,000 square feet in the second half of the year. There are also a handful of smaller users looking to buy. Richmond Hercules, Pinole, Richmond, Pablo, El Cerrito Oakland Leandro Leandro, Lorenzo Asking rates have remained the same over the first half of the year. There has been some rent growth in the Class A product, and Class B 9 Eichler Street, April 8,88 Dowell Wholesales, Inc Warehouse/Distribution 99 Arden Road, April 8,80 Pacific Die Cut Industries Warehouse/Distribution Sales activity Property Address Sale Date Size Buyer Type 06 Genstar Road, May 08,0 Win Woo Trading, LLC Warehouse/Distribution 8-87 Clawiter Road, April,00 Longdo Trucking Warehouse/Distribution hayward warehouse/distribution hayward light industrial hayward r&d/flex $0.90 $0.6 $0.80 $0.70 $0. $0.8 $0. Vacancy Rate Average Asking Rent Vacancy Rate Average Asking Rent Vacancy Rate Average Asking Rent Colliers International - Oakland p.

6 research & forecast report Q Industrial Richmond Hercules, Pinole, Richmond, Pablo, El Cerrito Oakland Leandro Leandro, Lorenzo Alvardo-Niles Road, > The industrial market has seen slight to moderate increases in vacancy across all product types in. Overall rates are 0. percent compared to 8.0 percent at the start of the year. Light industrial vacancy is up from.0 percent to. percent in the same time period; warehouse/distribution vacancy increased from. to.8 percent; and R&D/ Flex saw a minor increase from. percent to.9 percent. The largest space to come onto the market this quarter was 8,0 square feet at Decoto Industrial Park. Increases in vacancy can largely be attributed to several smaller spaces becoming available. We expect to see slight increases in occupancy over the next year as tenants try to lock in low lease rates before significant rental rate growth occurs. Despite an increase in vacancy, overall asking rental rates have edged up slightly since the beginning of the year from $0. to $0.7 NNN psf/mo. Historically, has relatively high rates compared to other I-80/I-880 submarkets due to its proximity to the South and Peninsula. Warehouse/distribution rates are presently $0., up from $0.9 NNN psf/mo at the outset of the year. R&D/Flex rates are $0.9, up from $0.78 NNN psf/mo. Light industrial rates have decreased to $0. from NNN psf/mo. As we anticipate relatively stable vacancy, we do not foresee meaningful rental rate growth for the remainder of the year. The largest lease this quarter was Spicers Paper s renewal of,860 square feet at 008 Eigenbrodt Way. Gross absorption was down significantly at less than 7,000 square feet in the second quarter, and year to date absorption is approximately half of what it was at midyear. Though there were several other lease transactions this quarter, all were less than,000 square feet. The most significant event in the submarket during the second quarter was Westcore Properties acquisition of Central Plaza, a 70,086 square foot R&D/Flex complex on Alvarado-Niles Road. 008 Eigenbrodt Way, June,860 Spicers Paper Warehouse/Distribution 009 Ahern Avenue, June 8,880 Golden Apple Warehouse/Distribution Sales activity Property Address Sale Date Size Buyer Type Alvarado-Niles Road, April 70,086 Westcore Properties, LLC R&D/Flex 97 Volpey Way, June 60,080 Coast Citrus Warehouse/Distribution union city warehouse/distribution union city light industrial union city r&d/flex $.0 $0. $.00 $0.9 $0.90 $0.8 $0.80 $0.7 Vacancy Rate Average Asking Rent Vacancy Rate Average Asking Rent Vacancy Rate Average Asking Rent p. 6 Colliers International - Oakland

7 research & forecast report Q Industrial Market Comparisons Industrial market Sub-type Bldgs Total Inventory Direct Vacant Direct Vacancy Rate Sublease Vacant Sublease Vacancy Rate Total Vacant Vacancy Rate Current Quarter Vacancy Rate Prior Quarter Net Absorption Current Qtr Net Absorption YTD Completed Current Qtr Under Construction Avg Asking NNN richmond Industrial 6,09,06 8,66 6.%,9 0.9% 876, (8,9) (,8) - - $0.8 Warehouse,6,98 0,0 0.%,00.% 7,70.%. 8,978 (89,07) - - $0.7 R&D/Flex 0,6,7 76,9.% 6, ,.% 6.,7 6,0 - - $0.8 Total 68,79,80,8,89.% 8,9.,6,78..% 96,796 (6,06) - - $0.9 Oakland Industrial 8,66,9,08,0. 9,09 0.,,080..7% 9,8 7, Warehouse 6 0,66,0 790,0 7. 0, , ,87 96, $0. R&D/Flex Total 990,80,6,87,0. 9,6 0.,9,66. 6.,0 7, - - $0. Leandro Industrial 60,66,80 88,6 7., , 7. 7.% (7,06) 8, $0.6 Warehouse 7,,08,. 68,80. 60,9..7% 68,00 9,79 -,60 $0. R&D/Flex 87,80,.% - 0.,.%.9%,767 (9,07) - - $0.8 Total 69 7,0,98,8,98. 90,77.%,69,6 6.% 6.,7 8,88 -,60 $0. Industrial 78 6,0,07,8,08 8.,7 0.7%,9,0 9.% 8. (7,00) (06,8) - - $0.9 Warehouse,078,,69,6 0.% 690,8.%,860,8..% (0,86) (9,8) - - $0.9 R&D/Flex 07,79,87,78.,0. 66,708..% 6, 0, $0.68 Total,0,6,9,06, ,60.,9,66.7% 0.% (99,0) (67,07) - - Industrial 6 7,88,678 97,706.,0 0. 0,77..% (0,87) (70,98) - - $0. Warehouse 80 7,87,6 99,660. 0,878 0.% 980,8..,97 (8,7) - - $0. R&D/Flex 870,67 8,7.9% ,7.9%.9% - (,0) - - $0.9 Total 6,9,876,9,6 9.,909 0.,9, ,00 (6,00) - - $0.7 Market Total Industrial,66 6,808,60,78,9 7.,07 0.,8,6 7.% 7. 8,90 (6,8) - - $0. Warehouse 68 7,689,6,70,80 8.,,.,8,97 0.% 9. (80,) 70,9 -,60 $0.8 R&D/Flex 7 9,7,677 97, ,60 0.,09,9 0.% 0.,67 8,6 - - $0.76 Total,8,,70 0,7,89 7.,8,88.%,666,7 8.9% 8. (9,68),686 -,60 $0. QUARTERLY COMPARISON AND TOTALS Q-,8,,70 0,7,89 7.,8,88.%,666,7 8.9% 8. (9,68),686 -,60 $0. Q-,8,,70 0,67,969 8.,09,7 0.,7, ,0 8,0 -,60 $0. Q-,8,,70 0,0, 7.9%,08,8.%,8, % 6,080 7, -,60 $0. Q-,8,,70,7,87 8.%,00,606 0.,8,77 9.% 8. (666,69) 66,7 -,60 Q-,8,,70 0,97, 8.% 89, 0.7%,9, % 07,,0, -,60 $0., CA Colliers International - Oakland p. 7

8 research & forecast report Q Industrial OFFICE Aileen Dolby aileen.dolby@colliers.com Scott Greenwood scott.greenwood@colliers.com Benjamin F. Harrison benjamin.harrison@colliers.com Trent Holsman trent.holsman@colliers.com Kenneth W. Meyersieck Managing Partner/SVP ken.meyersieck@colliers.com Danea Adams Assistant to Ken Meyersieck danea.adams@colliers.com Al Musante al.musante@colliers.com INDUSTRIAL Chet Barney chet.barney@colliers.com Brennan Carpenter Senior Associate brennan.carpenter@colliers.com Kevin Hatcher kevin.hatcher@colliers.com David Henderson david.henderson@colliers.com Greig F. Lagomarsino, SIOR greig.lago@colliers.com Catherine Wong Assistant to Greig Lagomarsino catherine.wong@colliers.com Mark Maguire mark.maguire@colliers.com Nick Ousman Associate nick.ousman@colliers.com Sally Pearsall Assistant to Mark Maguire & Kevin Hatcher sally.pearsall@colliers.com Casey Ricksen, SIOR casey.ricksen@colliers.com Sean Sabarese Associate sean.sabarese@colliers.com Todd O. Severson, SIOR todd.severson@colliers.com Justin Smutko Associate justin.smutko@colliers.com Joe Yamin joe.yamin@colliers.com INVESTMENT/ PRIVATE CAPITAL GROUP Kenneth W. Meyersieck Managing Partner/SVP ken.meyersieck@colliers.com RETAIL Solomon Ets-Hokin solomon.etshokin@colliers.com Reesa Tansey Senior Associate reesa.tansey@colliers.com dra Weck sandra.weck@colliers.com ADMINISTRATIVE Catherine Arlin Operations Manager catherine.arlin@colliers.com Donna Thibeaux Administrative Assistant donna.thibeaux@colliers.com Rishika Das Administrative Assistant rishika.das@colliers.com RESEARCH Molly Herrick Research Analyst molly.herrick@colliers.com MARKETING Nicole Neuerburg, LEED AP Marketing & Graphics Coordinator nicole.neuerburg@colliers.com offices in 6 countries on 6 continents United States: 7 Canada: 7 Latin America: 9 Asia Pacific: 0 EMEA: 8 $.8 billion in annual revenue $. billion square feet under management Over,00 professionals Colliers International Oakland 999 Harrison Street Suite 70 Oakland, CA 96 tel FAX Managing Partner Ken Meyersieck Managing Partner CA License No tel Researcher Molly Herrick Research Analyst tel This report and other research materials may be found on our website at This report is a research document of Colliers International - Oakland, California. Questions related to information herein should be directed to the Research Department at Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. As new, corrected or updated information is obtained, it is incorporated into both current and historical data, which may invalidate comparison to previously issued reports. Colliers International. Richard P. Keely richard.keely@colliers.com Zach Anderson Associate zach.anderson@colliers.com Accelerating success. Colliers International - Oakland p. 8