by Bill Wilson, Senior Broker, TRI Commercial
“There must be more to life than having everything” – Maurice Sendak
Positive Absorption (net gain) this year for the San Francisco market is 2.2 million square feet versus 1.6 million square feet a year ago. That translates into the vacancy factor in the Central Business District going from 5.9% last quarter to 5.3% currently; which means landlords in Class A space can ask for rents nearly double the $35/square feet that was normal five years ago. Have you doubled your revenue?
Gone are the days when tenants could go South of Market to receive a discount of 30-40% compared to asking rates North of Market. All of the action is South of Market. The only new construction North of Market is happening at 350 Bush Street (in back of the Russ Building) where Lincoln Properties is constructing 435,000 sq.ft. to be delivered shortly after 2015. Roughly 5 million square feet is in the pipeline for construction South of Market but the space is already 40% leased!
Solutions to the problem of rising rates vary from reducing suite size and reflecting smaller staff needs to being able to shrink necessary space by 10-20%. Some tenants are downgrading to Class B and looking forward to being able to open the windows to let in natural air and saving $5-10/square feet. In San Francisco, areas with relatively inexpensive rents are the Van Ness Corridor, North Waterfront and Union Square submarkets. Then there’s the ultimate solution: To move out entirely, or in part, from San Francisco. Oakland is the recipient of several non-profit agencies due to this trend. In April, Gordon & Reis moved about one-quarter of their headquarters operation, consisting largely of support staff, to 1111 Broadway across the Bay. There are 460,000 commuters who spend valuable time on BART daily to get to S.F. from the East Bay.
By the time you get this letter, the Giants will hopefully be on their way to another Championship, the stock market will have scared everyone again with its volatility, Europe will be closer to a recession threat, Ebola will be a household name and San Francisco rents will still remain high. Take a minute to call and tell me your real estate situation. We can find a solution!
Visit Bill Wilson’s website – http://sfspaceadvocate.com/main/
POSTED ON NOVEMBER 11, 2014
San Francisco is a veritable boom town that has already surpassed the market roar of 1999. It can even conceivably be compared to 1849, when gold was discovered 100 miles east. In fact, this year is so utterly off the charts that most of us in the commercial real estate industry have never seen an upcycle like this in our entire careers.
Witness the fact that through the first three quarters of 2014, San Francisco’s gross office absorption reached 7.6 million square feet. Net absorption in this same period was 2.4 million square feet. This compares with 1999, the record year, when gross absorption was 7.4 million square feet – and that was for the entire year! It is quite possible we’ll hit 10 million square feet of gross absorption by the time 2014 closes out. Incidentally, net absorption for 1999 was “only” 526,000 square feet.
Not surprisingly, three out of the four biggest leases in the third quarter were completed by tech companies. The tech frenzy in San Francisco has been well documented. Most of the Silicon Valley companies want, or need, to have a presence in the city. The trend is employment-driven. Young techies don’t want to commute to the suburbs, and there are plenty of jobs.
San Francisco added 1.11 million new jobs between August 2007 and August 2014 – a 10.5 percent increase in the employmented base here, according to Chris Thornberg, founding principal of Beacon Economics. The city’s employment gains are greater than all other California cities. They also rank among the highest, if not the highest, in the U.S. during the recession’s recovery.
This makes now an exciting time to be in San Francisco, but it comes with the risk that our local and regional economy is overly dependent on sustainable growth by technology companies.
For a little perspective, our CORFAC International colleagues from London recently paid TRI a visit. Farebrother/CORFAC International told us that while tech is also hot in the U.K.’s capital, it accounts for a reasonably healthy 15 percent to 20 percent of leasing activity in London. San Francisco’s leasing activity is 65 percent tech-driven or more.
When rents used to get out of hand during upcycles, companies would typically flee to Oakland and other points in the East Bay. Not tech companies in this cycle. We’ve created a new submarket to absorb some of the growth: Mid-Market, where Twitter is headquartered.
Composed of some 3.5 million square feet, no one would have located their businesses there five or six years ago. Nowadays, if space is tight in the historic tech center of SOMA (South of Market), tech companies will take space in traditional office properties in the Financial Center. They will simply make their interiors as creative as possible by gutting drop ceilings, increasing ceiling heights and exposing concrete and HVAC ducts.
By Jean Ko, Senior Vice President of TRI Commercial/CORFAC International in San Francisco. This article originally appeared in the November 2014 edition of Western Real Estate Business magazine.
– See more at: http://rebusinessonline.com/for-better-or-worse-tech-dominates-norcals-office-sector/#sthash.N0JyP5QG.dpuf
“Rocklin and Roseville have benefitted more than any other Sacramento submarket this year”, says Wirt
SACRAMENTO—TRI Commercial/CORFAC International president Tom Martindale, SIOR, recently revealed that John Gallagher, CCIM, CPM and managing director with the firm, led the TRI team that won the 531,273-square-foot commercial property management assignment in the Sacramento suburban community of Rancho Cordova that includes 10 separate properties under one ownership group.
The property owner is Karlin Cap Center LLC and the building addresses for the offices are: 11000, 11010, 11020, 11030, 11040, 11050, 11060, 11070, 11080, 11090 on White Rock Rd., Rancho Cordova, CA.
The buildings were constructed in 1984 and 1985 and the campuses are known as Cap Center II and III. Located in the Highway 50 Corridor of the state capital area, it is the largest submarket in the metro area and comprised of approximately 14 million square feet of office inventory. The submarket is predominantly occupied by large-space office users which include back office operations for several national and regional companies.
“We’re naturally proud to have won the management assignment in a competitive environment and look forward to supporting the occupants of the building as well as the owners to achieve maximum efficiency of building operations and on-going tenant satisfaction with the space they respectively occupy,” Gallagher says.
In fact, Bruce Wirt, SIOR and SVP in TRI Commercial/CORFAC International’s Roseville office, exclusively tells GlobeSt.com that Rocklin and Roseville have benefitted more than any other Sacramento submarket this year.
“We’ve had quite a bit of positive absorption in Rocklin and Roseville the first half of this year for several reasons,” Wirt says. “With the recovering economy and rental rates finally increasing, we had some classic ‘flight-to-quality’ leasing activity. Plus, many of the decision makers live in these communities and they prefer shorter work commutes,” he says.
While the Rancho Cordova/Highway 50 market hasn’t been the busiest submarket in the Sacramento Metro market this year, the Rancho submarket does offer 25,000-to-50,000-square-foot floor plates to users at competitive prices, compared with the tonier neighborhoods in Roseville and Rocklin, says Gallagher.
A few of the bigger deals in Rocklin this year, according to Wirt, are: PG&E expanding into 38,000 square feet (consolidated from several locations); Liberty Mutual taking roughtly 50,000 square feet, relocating from the Point West submarket; and Rocklin Academy leasing about 40,000 square feet (a brand new charter school); they went into a building that had been vacant since 2007.
Some of the recent Roseville deals this year he mentioned include: Rabobank expanding into 83,000 square feet, from about 40,000 square feet; Solar City leasing 55,000 square feet; and SureWest in the process of selling its 200,000-square-foot campus to Bridgeway Church.
Merlone Geier Makes Shopping Center Play
SACRAMENTO—The University Village Shopping Center, located at the southeast intersection of Fair Oaks Blvd. and Howe Avenue in Sacramento has changed hands. The seller wasHowe and University LLC, a local investor that acquired the property in 2002.
Merlone Geier Partners, a San Francisco-based investment company, purchased University Village Shopping Center for an undisclosed price, which is reportedly said to be around $20 million.
TRI Commercial/CORFAC International’s Bryan Wirt was the only broker involved in the deal. The 82,688-square-foot shopping center is approximately 97% occupied with only one, 1,700-square-foot space available for lease.
“This is one of the most prominent grocery-anchored retail centers on one of the busiest intersections in Sacramento… it is definitely a great piece of real estate,” Wirt, who specializes in retail real estate investment sales, tells GlobeSt.com.
Wirt adds that it was a “value-add” investment for Merlone Geier Partners and that portions of the property could be redeveloped to add more retail space.
The center, located at 27 University Ave., is anchored by Safeway in approximately 27,000 square feet. Other tenants include CVS, Citibank, Starbucks, AT&T and Bandera Restaurant.
Merlone Geier Partners is a private real estate investment company focused on the acquisition, development and redevelopment of retail and retail-driven mixed-use properties on the West Coast. Primarily focused on community and neighborhood shopping centers, the firm and its predecessor, M&H Realty Partners, has been actively investing in West Coast retail property since 1993.
Falls Church, VA (September 6, 2014) – Scott Savacool, SIOR, CCIM, 2014 CORFAC Vice President and Chair of the Standards of Excellence Committee, is proud to announce TRI Commercial/CORFAC International as a 2014 Platinum Award Winner. The Second Annual CORFAC International Standards of Excellence Awards were handed out during a ceremony on September 5, 2014 at the CORFAC International 2014 Fall Summit in Chicago, IL.
This award recognizes CORFAC firms that exceed industry standards and operate with the CORFAC Core Values, Mission, and Vision in mind. The winning firms are the CORFAC affiliates who participate the most in the CORFAC network, are recognized in the industry for their excellence and leadership, and consistently represent the CORFAC brand.
“For over 37 years, TRI Commercial has prided itself on building lasting client relationships on a foundation of integrity and professionalism. Being recognized at the Platinum Award level for our significant contributions and branding efforts as part of our CORFAC International alliance is a tremendous honor, one that only serves to reinforce TRI’s goal of continuing to maintain and grow a tradition of excellence in commercial real estate.”
CORFAC International recognized twenty firms in three categories: Platinum, Gold, and Silver. TRI Commercial/CORFAC International was one of seven firms to win the 2014 Platinum Award.
About TRI Commercial/CORFAC International
At TRI Commercial, Building Great Relationships is more than a tagline; it’s an expression of our business plan. We build our relationships on a foundation of targeted client service and value-added information and we build them to last. Exceptional service is fundamental to our business. We measure our success on the strength of the relationship formed between agent and client. TRI has built a highly competitive and experienced team of professionals with one focus in mind: to form and maintain long-lasting relationships.
Our agents truly value the relationship more than the transaction.
About CORFAC International
CORFAC International (Corporate Facility Advisors) is comprised of privately held entrepreneurial firms with expertise in office, industrial and retail real estate leasing and investment sales, multifamily property acquisitions and dispositions, property management and corporate services. Founded in 1989, CORFAC International is celebrating its 25th anniversary in 2014. In association with FIABCI (the International Real Estate Federation) and global affiliates, CORFAC International offers commercial real estate services with market reach in 60 countries worldwide. Last year CORFAC firms completed more than 10,000 lease and sales transactions totaling approximately 368 million square feet of space valued in excess of $7.4 billion. For more information on the CORFAC network, contact 703.532.6160 or visit www.corfac.com.
By Ben Eubanks, Reporter – San Francisco Business Times
By J.K Dineen, Reporter – San Francisco Business Times
Trumark Urban has lined up Dallas-based Hillwood Investments as equity partner on its $400 million pipeline of San Francisco condo projects.
While the terms of the deal were not disclosed, Hillwood West is “committing to a substantial amount of equity necessary to build seven condominium projects with more than 600 units in desirable San Francisco neighborhoods,” Trumark said in a statement.
The announcement of the partnership comes a week after Trumark closed on the acquisition of two development sites, one in Pacific Heights and one in Cow Hollow. The first acquisition, a $37.8 million development on the site of a former gas station at 1501 Filbert, will break ground on July. The second purchase is the existing Dugoni School of Dentistry campus at 2155 Webster St. in Pacific Heights. Trumark is proposing to redevelop the building as a 77-unit condo project with spacious, ultra-delux unit. That project will cost $155 million. Trumark will spend the rest of this year on design and entitlements and plans to break ground in 2014.
Arden Hearing said Trumark had four or five properties under agreement when talks with Hillwood started hearing up. “They liked what we had but said ‘load the boat and get more,’” said Hearing. “So we have been aggressive in getting more.”
In addition to the seven properties the group controls, Trumark is in negotiation to buy two more sites.
Hillwood is part of a portfolio of companies headed up by Ross Perot Jr.
“Trumark has assembled an unparalleled portfolio in one of the finest cities in the world,” said L.M. Cummings, president of Hillwood West. “We have a high level of respect for Trumark’s ability to execute development projects over its 25-year history. When we toured these sites and saw the vision, and then considered the stage of the economic recovery that we appear to be in, we were excited to team up with Trumark in pursuit of these opportunities.”
By Patrick Hoge, Reporter – The Registry, SF
RocketSpace got its start as a co-working vendor for tech startups and started expanding its mandate from there to include fundraising, recruiting, user acquisition and forming partnerships with large corporations.
Now, with startups continuing to multiply in San Francisco, the two-year-old company says it is expanding its physical footprint some more, grabbing another 26,190 square feet in the Financial District in addition to the 48,000 it locked up a block away in March.
Already, RocketSpace has contracted for virtually all of the 48,000 in space it will occupy initially, with the rest of the space expected to be filled in phases over the coming year, said Eryc Branham, who is the company’s chief revenue officer.
“We see plenty of demand for our services,” said Branham, who estimated 30 to 35 startups a week apply to get into RocketSpace, which is selective about who it invites. Past tenants have included Uber Technologies, the fast growing mobile device limo, taxi and ride dispatching service, and Leap Motion, the maker of motion controllers for computers, among other successful ventures.
The new lease at 225 Bush Street will house the RocketSpace Accelerator for seed funded tech startups, and largely replace the function of RocketSpace’s current headquarters at 181 Fremont Street, which will be demolished as part of the Transbay Tower construction. RocketSpace, which currently rents to 400 startups, must move by July 21.
The larger lease, at 180 Sansome Street, will house RocketSpace Suites, a place for bigger startups that need more space than RocketSpace has been able to provide to date, as well as offices for use by corporations and governments aiming to cultivate ties with tech startups. Tom Poser and Wes Powell of Jones Lang Lasalle represented RocketSpace, while Ken Churich from the CAC Group represented the sublessor, Viacom.
Duncan Logan, CEO and founder of RocketSpace, is calling the stretch of Sansome where he is moving “SanSoMa,” referring to the South of Market neighborhood that the city’s tech boom has made so chic.
San Leandro-based TriNet, a provider of online human resources services, is the anchor tenant at 180 Sansome. RocketSpace also has an annex of about 20 desks at 128 Spear Street in the offices of Bear Data Systems, with which it partners.
As it spreads out, RocketSpace continues to expand its business model. On July 22, the company will launch a new educational program called RocketU that promises over a period of 10 weeks to help qualified people get cutting edge technical skills, and possibly get hired by startups in RocketSpace, virtually all of which are struggling to fill vacancies.
Tuition is $10,000, but students can pay less up front if they agree to share a portion of their salary should they get hired on leaving the program. The first class will have 20 students, but the space for the program at 225 Bush Street will accommodate up to 50.
The educational program is another way that RocketSpace, which says it runs an “innovation campus,” is looking to help startups succeed, helping to create qualified workers that are in currently short supply, Branham said.
“We are all about looking at the tech economy and finding ways to connect the dots,” Branham said. Putting a bunch of tech economy players together is part of the picture, but not all of it, he said.
“The premise is that real estate is the platform on which we deliver everything else that we do,” he said. “Proximity is important. It’s necessary, but insufficient to connect the dots.”
By Blanca Torres – Reporter-San Francisco Business Times
Satellite Affordable Housing Associates plans to break ground this month on the $33 million, 92-unit Lakeside Senior Apartments at Second Avenue and E. 15th Street in Oakland. Satellite partnered with Oakland Housing Initiatives and the Oakland Housing Authority on the project.
The property, designed by David Baker + Partners, will include one-bedroom apartments. The contractor on the project is James E. Roberts Obayashi Corp.
Satellite also recently upgraded five of its senior communities, totaling about $25 million for 350 units. The properties include four in Oakland: Satellite Central, Park Boulevard Manor, Doh On Yuen, and Glen Brook Terrace, as well as one in Berkeley, Stuart Pratt Manor.
The rehab included improving the common areas, systems and façades and was designed by Anne Phillips Architecture. Construction was done by a joint venture between D&H Construction and BBI Construction.
Coldwell HQ to Concord
Coldwell Banker’s Northern California headquarters for residential real estate is moving from Bishop Ranch in San Ramon to a 16,000-square-foot space in Concord Gateway, a 600,000-square-foot office complex at 1855 Gateway Blvd. in Concord.
Moving to Concord brings the office closer to employees who live in eastern Contra Costa County, the company said. Negotiations between Coldwell Banker and landlord Sierra Pacific Properties took about a year.
“Bishop Ranch also fought hard to keep its tenant,” said Scott Ellis, a Transwestern broker who represented the landlord. “But Sierra Pacific Properties patiently worked through several different proposals to allow Coldwell Banker to build space in a new location. This deal is a big victory for Concord Gateway.”
Sierra Pacific, a Bay Area developer, built Concord Gateway, a two-building, 10-story office complex, about 25 years ago. Trigger Reital and Terry Vani, both of Transwestern, also worked on the deal. Kirk Beebe of CBRE represented Coldwell Banker.
Company grows fivefold
Restoration Management Co., a fire and property damage restoration company, bought a 155,000-square-foot industrial complex at 4120-4142 Point Eden Way in Hayward to house the firm’s headquarters.
The company, founded in 1985, plans to move from its previous, 32,000-square-foot space in Union City.