The cost of doing business and heightened competition in top markets such as the Bay Area, Silicon Valley and the Los Angeles metro is increasingly untenable, and companies are setting their sights on inland markets.
By Lisa Brown | July 20, 2020 at 04:00 AM
WALNUT CREEK, CA—Before the global pandemic that roiled the economy and commercial real estate industry, commercial real estate brokers were noting a growing trend of companies moving out of dense West Coast markets. Faced with rising prices, and lack of office and industrial space, along with the rising cost of housing and business taxes, many small- and middle-market enterprises were under pressure.
The cost of doing business and heightened competition in top markets such as the Bay Area, Silicon Valley and the Los Angeles metro was untenable, and companies began to set their sights on inland markets. The COVID pandemic is projected to accelerate this trend, according to Edward Del Beccaro, executive vice president with TRI Commercial/CORFAC International.
In California’s major markets pre-March 2020, vacancies were decreasing in every sector except retail, which had exhibited an overall demand dip regardless of location. At the same time, the affordability and availability of housing in California were making it difficult for working- and middle-class people to find homes. In 2019, Census data showed that more people had moved out of California than had moved in for the seventh year in a row and a University of California Berkeley poll found 71% of people cited high cost of housing as the top reason for wanting to leave the state.
Mid-sized and small businesses such as billing companies, insurance firms, enterprise service companies, and smaller manufacturing and logistics firms couldn’t compete with larger employers for space or talent. Those firms needed to relocate where workforces could find lower cost of living and better quality of life.
“Particularly in the Bay Area, our firm has seen companies reach their limits,” Del Beccaro tells GlobeSt.com. “Because the Bay Area is constrained due to water, companies have spread out as far as Sacramento 60 miles northeast, creating super-commutes for their employees with travel times exceeding 1.5 hours one way. Business owners are looking beyond the Bay Area where both they and their employees can find better value and have more balanced home life. The COVID crisis also has companies looking at remote working and even leasing satellite locations in the outer suburbs away from downtowns.”
In the Western US, smaller companies have increasingly moved into inland states including those in the near west such as Utah, Nevada, Colorado and Arizona. Chief Executive reported that from to 2015, more than 1,800 companies left California.
One beneficiary of the Cal exit is Nevada, where the favorable business climate and growth of companies following a new Google data center in Henderson is causing a new housing boom. MDL Group/CORFAC International, a brokerage based in Las Vegas, recently found flex industrial space for a solar panel company moving from Fontana, CA.
“We expect this trend to continue with similar type energy-related companies because the overall cost of living and cost of doing business within the Southern California market is excessive,” said Hayim Mizrachi, president and principal of MDL Group. “Plus, Nevada has an excellent new home market and construction market, which will drive demand for alternative energy sources. Our climate is ideal for solar use and related businesses.”
While the full impact of the COVID-19 pandemic is yet to be known, one possible trend brokers are watching is that more businesses will look to spread beyond dense urban centers and coastal cities, which have been harder hit by the virus. Similarly, as remote work becomes more accepted, resulting in changing needs for space and staffing, companies may no longer need to be in expensive coastal cities. The California exodus may accelerate as middle-market firms choose to relocate operations to cities that are friendlier for business and more livable for employees, Del Beccaro says.
Read original article on GlobeST.com here.
By GEORGE AVALOS | gavalos@bayareanewsgroup.com | Bay Area News Group
PUBLISHED: June 15, 2020 at 5:45 a.m. | UPDATED: June 15, 2020 at 8:57 a.m.
OAKLAND — PG&E sought for years to find ways to exit its inefficient San Francisco headquarters complex and transplant its offices to the East Bay before finally striking a deal for a downtown Oakland office tower, bankruptcy court records show.
Court documents also reveal PG&E’s official estimate for the number of workers the utility expects to deploy to the new Oakland headquarters: 4,500.
PG&E’s deal for a lease with an option to buy a 28-story office tower perched on the shores of Lake Merritt is intricate, according to documents in PG&E’s $58 billion bankruptcy case that’s now in its final days.
Yet it appears the deal is a win for PG&E customers, the utility, and for TMG Partners, the veteran developer that intends to ultimately lease and sell the highrise to PG&E.
“For PG&E ratepayers, it’s a smart deal for the company to make. For TMG, it’s a brilliant deal,” said Edward Del Beccaro, an executive vice president with TRI Commercial/CORFAC International, and Bay Area managing director for the commercial real estate firm.
The utility’s deal for the downtown Oakland office tower includes a base rent of $57 a square foot per year, which works out to $4.75 a month per square foot, U.S. Bankruptcy Court files show.
“That rental rate is very low for downtown Oakland office space,” Del Beccaro said. “I would have predicted it would have been $70 a square foot per year.”
PG&E is poised to shell out up to $892 million if the utility buys the 300 Lakeside Drive tower, which totals 910,000 square feet, from TMG Partners.
The $892 million is an over-arching “all-in cost” with several components. Court files state the elements are: $420 million as the basic purchase price to acquire the office tower; $141 million for required code improvements and building improvement costs; $171 million for development fees, carrying costs, and transaction fees and expenses; and $160 million in allowances for custom-tailored tenant improvements that include technology systems, security, floor arrangements, and seismic work. These work out to $230 a rentable square foot.
Since the early 2000s, PG&E has been mulling what to do with the San Francisco office buildings, executives stated in court records.
“Many of the utility’s (headquarters office complex) employees commute to San Francisco from the East Bay area, where the cost of living is far more affordable than in downtown San Francisco,” PG&E said in a court filing.
Plus, the San Francisco headquarters complex has become steadily more expensive to operate.
“The costs of maintaining a headquarters in San Francisco have continued to increase due to both the growth of the local real estate market and significant costs PG&E would face to upgrade and maintain the San Francisco office complex,” the utility stated in court documents.
By early 2018, PG&E intensified its efforts to extract cash from the San Francisco properties and hired TMG to evaluate the company’s real estate prospects in San Francisco and the East Bay. In September 2018, PG&E tasked TMG with finding an East Bay site for the future headquarters, bankruptcy papers show.
“The utility most recently began evaluating a number of specific options to monetize the San Francisco General Office headquarters complex, including a full or partial sale of the San Francisco offices, in early 2018,” PG&E stated in the bankruptcy court records.
The PG&E office complex in San Francisco consists of 77 Beale St., 215 Market St., 245 Market St., and 45 Beale St., court records show.
TMG and PG&E scouted an array of East Bay sites, including the Bishop Ranch business park in San Ramon and a portion of the redevelopment project at the Concord Naval Weapons Station. No deal materialized.
“By mid-2019, PG&E had been unable to locate a satisfactory property in the East Bay area that could meet the utility’s various business needs,” the court records stated.
PG&E pondered selling 77 Beale St. and moving workers into 245 Market St., or the reverse. But 245 Market was deemed too small, and 77 Beale was too large.
Then came a break. In November 2019, realty firms Swig Co. and Rockpoint Group put on the block the 300 Lakeside Drive tower along with an adjacent mixed-use office building and a big parking garage.
Well aware of PG&E’s unrequited ardor for a new East Bay headquarters, TMG raced to make Swig and Rockpoint an offer.
“The utility quickly investigated and determined that the Lakeside Building would provide significantly greater economic benefits” than retaining a San Francisco headquarters. the court papers stated.
In January 2020, PG&E agreed to a deal for 300 Lakeside. A month later, Swig and Rockpoint picked TMG as the buyer of the tower, the mixed-use building, and the parking garage.
TMG negotiated a purchase of the complex while well aware PG&E was waiting in the wings as a 300 Lakeside tenant after the departures of tenants BART and the University of California Office of the President.
“PG&E intends to use the Lakeside Building as its new company headquarters, where it can consolidate approximately 4,500 employees currently located in San Francisco and at least two satellite offices in the East Bay,” the court records state. The East Bay sites are in Concord and San Ramon.
The 300 Lakeside renovations are slated to start in 2022.
“It is currently anticipated 3,200 employees will be relocated to the Lakeside Building by early 2023, approximately 600 employees in 2025, with the balance of the space to be made available for an additional 600 employees beginning in 2026,” the bankruptcy files stated.
TMG, after selling the tower to PG&E, would retain the parking garage and smaller mixed-use building. Those sites have a large enough footprint that they could be developed into one or more towers.
Obstacles remain. TMG must buy the site. A bankruptcy judge must grant approval. PG&E’s track record of a string of fatal disasters that include an explosion and wildfires creates uncertainty.
“You can’t always predict what will happen with PG&E,” Del Beccaro said.
Read original article on Mercury News here.
Written By: Teddy Swain, TRI Commercial Real Estate Advisor
Given all that is going on in the world today – Covid-19, shelter in place, record unemployment – it is now more than ever crucial that we continue to see the much needed affordable and market rate housing be built in the Bay Area. Cities and counties are still under pressure from state guidelines to meet the needed housing production thresholds despite a market that has been at a standstill for the last two months.
As things begin to open back up, it won’t take long for investors, builders, and developers to remember that the Bay Area remains one of the most underserved housing markets in the nation. To discuss how these projects can still get funded during this public health crisis I interviewed Vern Padgett, a 40+ year banking and finance veteran and colleague of mine at TRI Commercial.
Vern – I appreciate you taking the time today to talk over Zoom. Can you share a bit about your background in finance?
I started my career in business out of college back in 1977 as a management trainee at the Mechanics Bank. At that time the bank did engage in commercial real estate lending but it was typically activity in support of clients that the bank had worked with for multiple generations. It was a rather docile institution from a business development standpoint.
As I worked my way up through Mechanics Bank, I became involved more and more with CRE lending and eventually started the corporate banking division. We basically revamped the bank into a real estate industries group and a corporate banking group. I took over the real estate industries side as that was my specialty for several years and eventually left the bank in 2006. I was then a founding member of Presidio Bank and after that the Chief Banking Officer at Bay Commercial Bank. Eventually I left Bay Commercial to start Black Oak Ventures where we offer more creative bridge financing for borrowers who aren’t quite ready for the institutional lenders for whatever reason.
Let’s jump right in with two examples of spec housing development: an 8 unit condominium project and a 100 unit mid rise apartment building. Both are speculative housing developments but both have vastly different debt requirements. How are those loans typically funded?
The first, smaller project would be of interest to your local or regional bank and there are any number of those banks in the Bay Area that would be interested in funding those loans today.
For the larger loan you are going to look for somebody in the market that is looking to fund a larger deal. Wells Fargo is the knee-jerk option because they are probably the most active in that space. They are very fussy about who they lend to so you’re going to need to be a Wells Fargo client in order to get a Wells Fargo loan. Union Bank would also be a lender that may be interested as they are also a large player in that space. All these guys basically operate in a similar way; they have hold limits so they’ll do a $100MM loan but they won’t hold the full amount. They’ll participate out with bank partners so you may have a Wells Fargo originating the loan but they’ll have a ‘bank club’ and bring in say Union Bank, B of A, California Bank and Trust and they’ll spread the $100MM across their partners and keep the piece they want.
So essentially on the larger loans banks are spreading out their holding risk with a select number of bank partners?
Yes – that’s the business that a lot of these big lenders are in. They’re in the business of managing the big relationships, taking care of their client needs, absorbing the amount of balance sheet exposure that is best for them and shedding the rest to their bank participants. Loan demand isn’t high enough for a lot of the bank participants who try and originate their own deals and they don’t have the clients to fill their balance sheets. We are wash with liquidity right now, so as one of these banks you don’t want to be running at 60% loans to deposits because you don’t make any money, you want to be up around 80%, 90% or 100%. That’s why these partner banks are out there anxiously buying participations.
How has the underwriting for these loans changed given the trouble our economy is facing?
Well, there hasn’t been that much done in the last month and a half. Things have pretty much tamed down as people wait to see how things will play out but I’ve talked to a number of construction lenders recently who are still actively soliciting projects and have closed construction loans on the smaller type deals that we discussed. However, post Covid-19 the rules on those loans have changed: you need to be able to underwrite a hold on the loan as though you are going to hold the asset long term as an apartment building and cover it at a Debt Service Coverage on a 25-year amortization of that construction loan fully funded based on your proforma. Construction lenders today are looking to price their loans on an either or basis; say prime plus 1 – prime is currently 3.25% – so that is a 4.25% minimum rate but they probably are going to fix the floor at 4.5%. So, you can look at it as prime plus 1 or 4.50%, the higher of those two.
I would say that the underwriting metrics have been tightened down a quarter twist on the screw. Deals that would have been done at say 70% of retail value are now being done at 65%. So you’re seeing like a 5% cram down on the tightness of the underwriting. I think we still need a couple of months to see really where things will land.
We are currently in the midst of the pandemic; do you see lenders’ ability to fund construction loans like the two in our example continuing?
The answer to the question really depends on the product type and the track record of the sponsor. Retail development right now is somewhat radioactive so you’re probably not likely going to see much ground up retail development… for obvious reasons. Multifamily though is radically underserved especially in the Bay Area. It is very difficult to achieve entitlement for multifamily and the cities are under immense pressure from the state to fulfil their housing mandates and so I would suspect there will continue to be heavy demand as lenders like to see unfulfilled demand as a driver behind the reason to develop real estate. Not withstanding all the trouble that the economy is dealing with at large today as a result of COVID-19 and the SIP regulations; I can’t imagine that there will be any kind of long term interruption in that category from a lending standpoint.
There seems to be a shift towards pursuing business with existing clients rather than procuring outside clients that lenders may not have an existing relationship with, is this correct?
Yeah, it’s not as though we are in the midst of a go-go upcycle where banks are going to stretch to open up the doors to people who have very limited experience. People who used to work for a homebuilder and now want to BE a homebuilder are going to have a tough time. Those that have relationships and can demonstrate a successful track record in-line with the deal that they are trying to get approval for will still be able to find success today.
If you had to summarize our conversation into a few main takeaways what would they be?
I recently had a discussion with Bank of Marin regarding post Covid speculative for-sale residential product. Some of the key points that we discussed were:
By GEORGE AVALOS | gavalos@bayareanewsgroup.com | Bay Area News Group
PUBLISHED: April 1, 2020 at 7:35 a.m. | UPDATED: April 2, 2020 at 2:19 p.m.
DUBLIN — Amazon has bought a big Dublin office building where it could employ as many as 1,000 or more people, paying nearly $50 million in a deal that marks a dramatic new East Bay expansion for the tech titan.
Amazon.com Services purchased the Dublin office building, which is located at 5160 Hacienda Drive, paying $49.5 million in cash for the property, according to Alameda County property records reviewed by this news organization.
The office building, which totals 202,000 square feet, was bought on March 17, the county public files show.
“We are constantly exploring new locations and weighing a variety of factors when deciding where to develop sites to best serve customers,” said Brittany Parmley, an Amazon spokesperson. She added, “We don’t provide information on our future roadmap.”
Amazon’s purchase of the office building at the corner of Hacienda Drive and Gleason Drive marks a departure from the tech titan’s property activity in the East Bay.
In November, the e-commerce and video streaming behemoth leased a huge industrial building in Livermore at 400 Longfellow Court that totals 612,000 square feet.
“Amazon Logistics will open a new California Delivery Station, located in Livermore,” Amazon said in November in an email sent to this news organization. “The new station will power Amazon’s last-mile delivery capabilities to speed up deliveries for customers in the Bay Area.”
In contrast to the company’s other efforts, Amazon has now bought an East Bay building, rather than leasing space.
In Sunnyvale, using a series of leasing agreements, Amazon occupies more than 1 million square feet of offices where the company has enough space for 5,000 workers.
In the East Bay, Amazon could potentially employ 1,000 or more at the Dublin office building it purchased.
“Silicon Valley is spreading from west to east,” said Edward Del Beccaro, an executive vice president with TRI Commercial/CORFAC International, a commercial real estate.
Read original article on East Bay Times here .
November 15, 2019
Activity remains hot in San Francisco’s central SOMA (South of Market) district as developers target the area for new opportunity. Buyers remain on the hunt for opportunities to reap the benefits, snapping up properties as they hit the market. Barry Bram, Principal of TRI Commercial/CORFAC International, recently represented sellers of two unique properties in this district, 465 Tehama and 960 Howard, selling for $8.4 and $5.6 million, respectively. At 465 Tehama, TRI Principal Cal Nakanishi represented the buyer.
The two buildings sit at the heart of a burgeoning wave of development in central SOMA, just blocks from Brookfield’s proposed 5M development near Mission and 5th Street. Plans for the nearly 1.7 million-square-foot mixed-use project will include seven buildings and 60,000 square feet of open space. Proximity to this type of development activity draws interest and bodes well for building owners.
Zoned for mixed-use residential (MUR) development, the Tehama property is a fully rehabbed 8,000-SF state-of-the-art building with major upgrades to the structure/foundation, ADA life safety, electrical and plumbing systems. The buyer, Peacock Construction, will occupy the building as owner/user.
Bram offered a few words of advice for buyers interested in property undergoing significant renovation or rezoning, “Buildings in this area are few and far between, and any building with a significant footprint is fought over by interested buyers the minute it becomes available, or is even thought to be available. Zoning and use continue to be an area worth investigation prior to leaping forward, but it rarely creates an insurmountable challenge.”
Over the past five years, the price per square foot for office buildings in central SOMA has increased by more than 35% and industrial flex by 44%, respectively. Recently, Ellation, Akga and Pivotal took significant blocks of space and Nektar Therapeutics is expected to move into more than 100,000 square feet nearby.
With all the current details and potential pitfalls of zoning and owner use, Nakanishi said “the buyer of Tehama formed a team consisting of a land use attorney, San Francisco zoning consultant, architect, broker and lender to minimize unforeseen complications related to zoning and use. The negotiations were efficient and minimized delays since all team members were communicating with input.”
The Howard Street property, a longtime family-owned asset, sits on two parcels with a total footprint of 12,000 square feet, just two blocks off Market Street. Bram noted the buyer has plans to develop office and residential space. “It was a major coup for the buyer to be able to secure this purchase, with the pace of development in Central SOMA and limited investment opportunities,” he said.
About TRI Commercial/CORFAC International
Founded in 1977, TRI Commercial/CORFAC International is a leading Northern California commercial real estate brokerage and property management firm (with more than 4 million square feet of commercial property under management) specializing in San Francisco, East Bay and the Sacramento Metro property markets. The company has expertise in tenant and landlord representation services and helps clients buy and sell commercial and investment-grade property. The company serves office, retail, and land, multifamily and industrial property sectors, with offices in San Francisco, Walnut Creek, Oakland, Roseville, Sacramento, and Rocklin. For more information call Dina Gouveia in Corporate Marketing at 925.269.3305
CORFAC International is comprised of privately held entrepreneurial firms with expertise in office, industrial and retail properties, tenant and landlord representation, investment sales, multifamily, self-storage, acquisitions and dispositions, property management and corporate services. For more information on CORFAC’s International presence, call the Chicago headquarters at 224.257.4400
View the original article on The Registry here.
By GEORGE AVALOS | gavalos@bayareanewsgroup.com | Bay Area News GroupPUBLISHED: April 10, 2019 at 1:54 pm | UPDATED: April 11, 2019 at 1:09 pm
OAKLAND — Credit Karma will expand its Bay Area operations to a big downtown Oakland office tower, the tech company said Wednesday, in a deal that represents a fresh burst of economic expansion for the East Bay’s largest city,
The fast-growing financial services technology upstart will retain its current San Francisco headquarters, even after moving into the sleek new Key at 12th office tower in downtown Oakland.
“Credit Karma signed a lease for five floors, plus a roof deck, totaling 106,000 square feet, at 1100 Broadway in Oakland,” Credit Karma said Wednesday in comments emailed to this news organization.
The expansion to the East Bay will enable Credit Karma to use the BART system to link two company employment hubs so workers can zip back and forth between the offices by using the train line.
“With more than 1,000 employees, the company identified the site because it would allow the company to grow together in another building that is easily accessible via BART from the company headquarters located at 760 Market St. in San Francisco,” Credit Karma said.
The company is expected to move to the new downtown Oakland offices by sometime in 2020.
“Access to top talent residing in the East Bay and Fremont area” was one of the factors cited by Credit Karma for its expansion to downtown Oakland.
Plus, Credit Karma also believes that an expansion to downtown Oakland could significantly improve the commutes for numerous current workers.
“The majority of Credit Karma employees who reside outside of San Francisco live in the East Bay,” Credit Karma said.
Credit Karma’s deal comes on the heels of other major tech company expansions in downtown Oakland.
“This is great momentum for downtown Oakland,” said Benjamin Harrison, a senior vice president with Colliers International, a commercial real estate brokerage.
In December, Square, a financial services tech company, announced that it had leased all of the office space in downtown Oakland’s Uptown Station complex. The office portion of Uptown Station totals 356,000 square feet, which is enough space to accommodate roughly 1,700 workers or more.
Marqeta, a tech company that provides a card issuing and processing platform, has been expanding in downtown Oakland as well.
“These deals represent a coming of age for fintech companies,” said Edward Del Beccaro, an executive vice president with TRI Commercial, a commercial real estate firm.
New office and residential towers, as well as additional hotels, are expected to sprout on the Oakland skyline. Those new developments could well spur the East Bay city’s boom.
“In the next six months to a year, downtown Oakland is going to change for the better and much more than it has in recent years,” Harrison said.
Downtown Oakland in years past primarily grew when office rents spiked and spaces dwindled in San Francisco. When space became more plentiful in San Francisco, tenants ignored Oakland.
This time around, experts believe, downtown Oakland appears more capable of self-sustaining growth.
“Before it was just non-profits fleeing high prices in San Francisco, then it was back office operations moving to Oakland,” Del Beccaro said. “What’s happening now is an affirmation that downtown Oakland has arrived.”
View original Mercury News article here.
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By Meghan Hall , The Registry
March 12, 2019
As a whole, the Bay Area has strong office leasing fundamentals, powered by years of consecutive job growth and high, consistent levels of institutional investment. However, the cream of the crop when it comes to office space is San Francisco; its reputation as a world-class city and major financial and tech hub continues to spur competition among office tenants. With only seven square miles to spare — an even smaller portion of which is dedicated to commercial and office uses — real estate comes at a premium, and lease rates are high. A number of comparison reports compiled by brokerage firms active in the region shows the levels of leasing across a broad spectrum of office spaces. The comparisons were compiled by CBRE, Newmark Knight Frank, Cushman & Wakefield, Avison Young, and TRI Commercial, and they provide the companies’ best estimates into the leasing activity within the City. Dated from between November 2018 to February 2019, the reporting details what many of San Francisco’s companies are paying for space throughout the city.
The reports cover leases ranging from just a few thousand square feet to more than 100,000 square feet. Many of the leases were concentrated in San Francisco’s most popular neighborhoods. Tenants’ leases are for a variety of Class A, B and C office spaces; however, the reports indicate that location was more of a determining factor in rental rates than quality of space.
5,000 Square Foot to 15,000 Square Foot Leases
Twitter, which has considerable space along Market Street in San Francisco, inked one of the smallest leases reported, renewing its lease for 4,646 square feet of Class A space at 1390 Market St. in San Francisco’s Mid-Market neighborhood; the renewed lease will begin in November 2019 and will last 60 months, expiring in October 2024. Twitter is paying $60.24 per square foot to San Francisco-based Swift Real Estate Partners. The renewal occurred alongside its decision to keep its space on three of the five floors at 1355 Market St. According to sources who track leasing activity in San Francisco, Twitter has renewed its lease on floors seven, eight and nine in Market Square, totaling around 215,000 square feet.
Getaround, a social car-sharing company, will lease 8,000 square feet of Class B office space from Brick & Timber Collective at 55 Green St. beginning in April 2019. San Francisco-based Getaround has secured the new lease for $43 per square foot, along with three months of free rent. The 123-month term is set to expire in June 2029. Brick & Timber acquired the building for $29 million, or just under $533 per square foot in April of 2018.
Knotel, a flexible workspace provider, took up two smaller office spaces in the city as part of its widespread growth around the greater Bay Area; the first and the smaller of the two is 6,258 square feet of space at 126-128 Post St. Knotel is renting the Class C space for $72 per square foot. The new lease commenced in March 2019 and will expire after 86 months in April 2026. The lessor of the property is Victor Wu. The second lease was signed for 9,586 square feet of Class B office space from PGIM Real Estate at 150 Post St. Knotel began occupying the space in January 2019, and the lease expires in January 2026. Knotel is leasing the space for $66.48 per square foot, full service growth. In addition to these two leases, Knotel announced its plans to take up 62,979 square feet of space at 625 Second St. — owned by Hudson Pacific Properties — bringing the company’s footprint in the city to more than 260,000 square feet.
SS&C Technology, an investment management software and services company based in Windsor, Conn., took up 11,472 square feet of space on the second floor of 580 California St., leasing the Class A space for $73 per square foot from landlord J.P. Morgan Asset Management. SS&C has been granted $10 per square foot in TI allowances, and the lease, which began in February 2019, is slated to last seven years, until March 2026. SS&C also received a healthy four months of free rent at the start of their term.
The Athletic Media Company will sublease Cloudera’s space at 525 Market St. in the heart of downtown San Francisco from Knickerbocker Properties, Inc. According to the comps, the firm moved into its 11,724 square foot space in December 2018, although the lease was formally signed January 1, 2019. The Athletic Media Company is paying $85 per square foot for its Class A space, one of the most expensive of the leases reported. The lease is expected to last 31 months and end in June of 2021.
15,000 Square Foot to 50,000 Square Foot Leases
Limebike, the popular on-demand scooter and bicycle company which has taken cities by storm, is subleasing its space at 1 Sansome St., from shopping platform Wish. Limebike took 17,459 square feet of space at the property beginning in August of 2018 and is paying $77 per square foot for the Class A space. Its lease term is shorter than most of the years, at just two years, and its expiration date is July 2020. No free rent is included with the lease agreement, and Limebike’s rent will increase by three percent annually.
Juul Labs, a vaping company, is paying $69 per square foot for its Class B office space at 99 Rhode Island St. It began renting the 20,000 square foot space in December of 2018 from Jawbone and, according to the comps, will lease the space until November of 2021. While it is headquartered in San Francisco, the company has also leased around 30,000 square feet of space in Mountain View Research Park; the leases come at a time when its headquarters, located at Pier 70, have come under scrutiny by local residents and San Francisco City Officials.
NASDAQ is subleasing 20,392 square feet on the fourth floor of 505 Howard St. and moved into the space in January 2019. Its lease agreement with American Realty Advisors, the property owner, will last five years, expiring in March 2024. NASDAQ is paying $84.50 per square foot for the Class A space, the comps show.
Omniscience Corporation is also leasing a healthy amount of space downtown; the Palo Alto, Calif.-based capital management company secured its 20,432 square feet at 100 Montgomery St. in the North Financial District in January of 2019, although the lease is not slated to begin until May 2019. Omniscience Corporation will pay $80 per square foot for its Class A space, on par with many other companies moving into offices around San Francisco’s CBD, and the lease is expected to last 86 months, ending in June 2026.
Samsara Networks has leased 23,288 square feet of space at 251 Rhode Island from Giurlani Trust. Samsara is paying $69 per square foot for its Class B office space just south of San Francisco’s Mid-Market neighborhood, which it moved into in January 2019. The lease is one of the longest reported at 90 months and will expire in July 2026.
Tibco Software renewed its lease for 24,128 square feet of space at 575 Market in February 2019. It secured the 14th and 15th floors of the building for a starting rent of $74 per square foot; $20 per square foot of TI is also included in the terms of the lease, which is set to expire in April of 2024. 575 Market, known more commonly as The Skyscraper Center, is currently owned by Boston, Mass.-based Manulife Real Estate Company.
Swiss multinational investment bank and financial services firm UBS renewed its 24,952 square foot lease at 555 California St. in October 2018. UBS has rented the entire 46th floor of the building for $105 per square foot — one of the most expensive rates reported — with a three percent annual increase and two months of free rent. $70 per square foot of TI work is included in the 120 month-long lease, which will expire in October 2029.
Zenefits’ 28,286 square foot lease at the Bechtel Building — located at 50 Beale St. — began back in October 2018, according to the comps. Zenefits is leasing the Class A space from Paramount Group, Inc., for a starting rental rate of $79 per square foot. While no free rent is included, $85 per square foot of tenant improvements was a part of the agreement. The lease term is 84 months and will expire in November 2025.
Iterable, a growth marketing platform, also signed a new lease for Class A space at 71 Stevenson St. Its second-floor office, totaling 35,162 square feet is slated to be Iterable’s home and headquarters until May 2022. Iterable is leasing the space from Los Angeles-based FIT Investment Corporation for $64 per square foot, far lower than many of the other companies leasing Class A space in San Francisco’s Financial District. Iterable has received two months of free rent, and its rent will increase by 3 percent annually.
Greeting card company Minted secured one of the more sizeable leases listed in in the reports, leasing 38,000 square feet from Turkey-based Polidev Investments, Inc. Minted is set to move into the space, located at 747 Front St., on May 1st, and the lease is expected to last 84 months. Minted will receive two months of free rent before it begins paying a base rate of $77 per square foot. It will occupy roughly half of the 86,171 square foot building, which was originally built in 1909. Polidev had placed the 85,423 square foot, Class A creative office building located in the San Francisco Jackson Square neighborhood on the market for sale earlier this year. The planned sales price is projected to be at least $75 million, or roughly $877 per square foot if it reaches that pricing, as stated by sources familiar with the sale of the property.
Redfin, the popular real estate listings site headquartered in Seattle, moved into its 48,841 square foot office at 333 Bush St. in January 2019 after signing its lease with Tishman Speyer in November of last year. The real estate firm is leasing the 22nd floor for $79 per square foot; $100 per square foot of TI work is included in the agreement, one of the highest amounts allotted for tenant improvement reported. Redfin’s rent will increase by three percent annually, and the lease is set to expire in June 2030.
100,000 Square Foot-Plus Leases
WeWork continued securing space in the city, taking 102,000 square feet spread across 8 floors at 1 Post St. in the North Financial District. WeWork has secured four months of free rent with a base rate of $80 per square foot. The effective, full service rent for the space is $99.08 per square foot. $120 per square foot of TI work is also included in the lease, which was executed on December 1, 2018. WeWork, however, is moving into the space in phases, moving into floors one, two and three of the building in January of 2019 and floors four and five April of 2020. The lease will expire in November 2034.
Cooley, a major Bay Area law firm, has also secured Class A office space in the City’s North Financial District. The law firm signed a new, 127,672 square foot lease at Three Embarcadero Center that will commence in January of 2020 and last until December 2029. Cooley has also secured a $100 per square foot in tenant improvement costs from owner Boston Properties. Cooley will be paying $85 per square foot, full service gross for its space with three percent increases over its 10 year term, the documents state.
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SACRAMENTO (January 28, 2019) – Sacramento witnessed a steady decline in vacant space during this most recent economic cycle and reported 10.16% at the end of 2018. The current vacancy rate is now in line with national vacancy for the first time since 2012. “The office sector will continue to perform well, as it has over the last few years – slow and steady increases as it relates to rent growth and demand,” said Vice President, Brandon Sessions. “However, we could see a plateau as mortgage companies, and housing-related sectors consolidate due to the slowing of the housing market.”
Highlights from the report include:
About TRI Commercial/CORFAC International
Founded in 1977, TRI Commercial/CORFAC International is a leading Northern California commercial real estate brokerage and property management (with over 4 million square feet of commercial property under management) firm specializing in San Francisco, East Bay and the Sacramento Metro property markets. The company has expertise in tenant and landlord representation services and helps clients buy and sell commercial and investment-grade property. The company serves office, retail, and land, multifamily and industrial property sectors, with offices in San Francisco, Walnut Creek, Oakland, Roseville, Sacramento, and Rocklin. For more information, visit www.tricommercial.com or call Dina Gouveia in Corporate Marketing at 925.269.3305 CORFAC International is comprised of privately held entrepreneurial firms with expertise in office, industrial and retail properties, tenant and landlord representation, investment sales, multifamily, self-storage, acquisitions and dispositions, property management and corporate services. For more information on the CORFAC call the Chicago headquarters at 224.257.4400 or visit www.corfac.com.
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Download Sacramento Q4 2018 Office Market Report here.
2018 Q3 TRENDS – San Francisco – Office
2018 Q3 TRENDS – Sacramento – Office
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