Market Reports

Prado-Santa-Clara-CA

— By Rachel Ivers, senior analyst, multifamily investment sales team, and Bryan Danforth and Matt Thomson, senior vice presidents, Compass Commercial — The multifamily investment sales market in the San Francisco Bay Area is undergoing a noticeable transformation that’s driven by economic pressures and evolving investor strategies. Unlike in previous years — where sellers might list properties to capitalize on market highs or interest rate lows — the current environment is seeing fewer sales motivated by profit.  Many sellers today are cashing out due to expiring fixed interest rates or selling for personal reasons rather than purely financial motivations. This includes circumstances such as inheritance, divorce or retirement. With the Baby Boomer generation, currently aged 60 to 78 and reaching retirement age in larger numbers, we’re beginning to see the front end of significant changes in property ownership. This demographic shift is likely to drive a substantial increase in inheritance sales in the near future as life expectancy hovers around 77.5 years.  A significant factor driving this shift is the belief among many investors that the market has peaked. Concerns about stricter rent control measures, which continue to appear on ballots, are prompting these investors to seek opportunities elsewhere. Markets …

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800-W-Tower-Ave-Alameda-CA.jpg

— By David Nelson, regional president of brokerage for Northern California and Nevada, Kidder Mathews — After record figures across most U.S. industrial markets in 2021 and 2022, key fundamentals cooled in 2023 and have been recalibrating ever since. Total net absorption has been negative in recent quarters, sublease space is on the rise, vacancy and availability rates have been steadily inching up, and average asking lease rates are relatively flat. Furthermore, the recent surge in development activity due to the rise in ecommerce penetration has been slowly drying up with construction starts dropping by more than 60 percent in 2023 and 2024.  Core industrial markets in the Bay Area experienced notable increases in both vacancy and availability. Silicon Valley vacancy rose from between 1.5 percent and 2.5 percent last year to 3 percent and 4 percent in 2024. Meanwhile, East Bay rose from 3.5 percent and 4 percent in 2023 to 5.5 percent and 6.5 percent in second-quarter 2024.  During the first half of the year, an increase in sublease space has been a major contributor to the higher rates. They have increased from the pre-COVID average of 9 percent of total available space to 19 percent at the end …

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555-Fulton-St-San-Fran-CA

— By Kazuko Morgan, executive vice chair; Alanna Joy Loeffler, managing director, business strategy and development, Americas retail services; and Soany Gunawan, senior research analyst, San Francisco retail research, Cushman & Wakefield — Over the past few years, the headline narrative surrounding San Francisco has focused on store closures, complex governance issues and city challenges. However, with one of the highest U.S. household incomes, a rising population count and the lowest unemployment rate in California, the city remains a beacon of opportunity, innovation and creativity. Within the urban retail market, San Francisco continues to demonstrate resilience and growth with a host of new brands, products and services arriving and thriving.  Retail sales in San Francisco have continued to increase, climbing an estimated 5.7 percent year over year to $37.1 billion in the second quarter of 2024. A multitude of exciting brands and new concepts are opening, flourishing or expanding. INGKA has launched its first-ever food hall, Saluhall, a 23,000-square-foot, plant-forward culinary project connected to the IKEA store at 945 Market Street. This addition not only creates jobs but enriches the community with regular events, highlighting local food vendors while offering fun and educational cooking classes. MillerKnoll’s modern furnishings brand Design Within Reach …

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— By Matt Davis — Imperial County is deeply intertwined with agriculture, experiencing significant growth in both farmable acreage and the value of its agricultural outputs. The region has had a 20 percent increase in the number of farms, a 40 percent expansion in farmed acreage and a nearly 65 percent rise in the market value of agricultural products sold over the past five years. However, agriculture is not the only growing industry in the Valley. It will also soon be recognized for its lithium extraction and geothermal energy production, as well as its role as a strategic logistics hub.  As newer industry sectors continue to grow and evolve in the region, their demand for land will also increase. Fortunately, Imperial County boasts ample available land to meet these needs. Investor interest in Imperial Valley land has surged as agricultural areas — despite continued growth — are increasingly transitioning to higher and better uses in key areas of the Valley.  From Farming To Energy Forward-thinking investors and developers have begun to purchase and reposition legacy agricultural land to support emerging lithium mining operations in northern Imperial County and logistics users near the Calexico-East port of entry in the south. They …

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The-Orion-Orange-CA

— By Pat Swanson — Orange County’s multifamily housing market is still facing challenges. These include rising operating expenses, such as escalating insurance costs and new regulatory standards like SB 721. However, I am optimistic that the county will experience a soft landing compared to other parts of the country. Inflationary pressures and stringent rent control measures in areas like Santa Ana have heightened financial burdens for property owners, impacting profitability and investment decisions. Investors are increasingly favoring higher-quality, long-term assets in premier coastal locations like Newport Beach where properties have shown robust rent growth, averaging 5 percent annually over the past five years. Our team of multifamily advisors works closely with clients to navigate this evolving landscape, emphasizing opportunities in high-demand, flight-to-quality assets. Seller-carry financing and loan assumptions have emerged as highly sought-after options, appealing to buyers seeking reduced upfront costs and flexible financing terms, while allowing sellers to maximize property value without heavy down payment requirements. There is pent-up demand in Orange County’s multifamily housing market, particularly for properties in the right areas. Our expertise lies in identifying and leveraging these opportunities for our clients. By understanding the nuances of market demand and regulatory changes, we can help …

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3-Hutton-Centre-Dr-Santa-Ana-CA

— By Nellie Day — Employers all over the nation are looking for ways to bring employees back into the office. In many cases, it’s been a large ask, as employees have adapted to the work-from-home environment and its perceived perks.  One of the biggest strategies employers have undertaken is creating an enticing environment where employees want to be. This can include intriguing office spaces, useful amenities, opportunities for socializing and beautiful outdoor spaces. This strategy can go even further when local businesses and municipalities work together. Such is the case with South Coast Metro Alliance, a non-profit corporation of Orange County, Calif.-based property owners and major businesses that have a long-term investment in the area through ownership and/or long-term leases. The economic development organization, which encompasses north Costa Mesa and south Santa Ana, has worked to ensure employers are proud of the spaces they can offer their employees — and that, in turn, employees are excited to return to the office.  WREB spoke to Diane Pritchett, executive director of the South Coast Metro Alliance, to discuss the specific strategies employed by businesses and the South Coast Metro Alliance to reactive the local office environment. WREB: How has the introduction …

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1065-Link-Anaheim-CA

— By Marty Pupil — The Orange County office sector continues to battle through the early stages of a market turnaround as tenants adapt to new workplace strategies while balancing employee retention and company production. The market is beginning to thaw, however, as more tenants make decisions on their office space requirements, creating opportunities for tenant activity. Net absorption was negative at the onset of 2024, totaling 338,100 square feet. South County experienced the highest amount of move-outs at 199,002 square feet, followed by the Airport Area with 171,171 square feet. Central County, North County and West County submarkets combined for positive absorption of 32,073 square feet. Right now, positive absorption shows up in pockets of the market and can vary by submarket and quarter. Positive absorption for the overall market will become sustainable when new leasing activity reaches levels that are high enough to compensate for givebacks. Total vacancy in the first quarter rose 20 basis points quarter over quarter to 18.1 percent from 17.9 percent, while increasing year over year from 18 percent. Despite this, current vacancy remains well above the pre-pandemic 10-year average of 13.9 percent. For perspective, vacancy peaked at 19.2 percent during the financial crisis …

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3000-3010-E-La-Jolla-St-Anaheim-CA.

— By Erick Parulan — The Orange County industrial market, along with Los Angeles and the Inland Empire, is experiencing a general decline in leasing activity as it navigates the post-pandemic landscape. Tenant demand and leasing have significantly slowed as occupiers adopt a more cautious approach to expansion, with some occupiers deciding to downsize and consolidate their industrial footprints.  Tenant occupancies continue to contract in the second quarter, with manufacturers, retailers and 3PL (third-party logistics) companies shedding unused space that may have been acquired during the pandemic frenzy, further increasing sublet availabilities. Orange County sublet availabilities surpassed 3.3 million square feet in the second quarter of 2024, raising total availabilities to 9.5 percent for the quarter. While pandemic-driven rental rates hit historic highs, they have since cooled amid softening demand. Many landlords now offer increased free rent concessions to attract new tenants. Average asking lease rates have been on the decline in Orange County over the past two quarters. They decreased by 5.2 percent from the prior quarter, reaching $1.64 per square foot in second-quarter 2024. High market rents previously deterred many occupiers, but with rents on the decline, some tenants have adopted a wait-and-see approach to see where rates …

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2375 N. Tustin Street in Orange, California

— By John R. Read — Orange County’s retail market continues to shine, mirroring its famously  consistent weather. Despite challenges like persistent interest rate fluctuations, capital markets volatility and signs of a slowing economy, the region remains a beacon for retailers and investors alike. This resilience has cemented Orange County as one of the strongest retail markets in Southern California and the nation. As 2023 drew to a close, a notable drop in the 10-year U.S. Treasury yield to below 4 percent and signals from the Federal Reserve of potential rate cuts in the upcoming year fueled optimism among real estate investors. However, 2024 has continued to see volatility, with yields reaching mid-4 percent levels and no rate cuts yet implemented. This environment has impacted Orange County’s retail investment sales volume, which saw a 29 percent drop in 2023 from the prior five-year averages and a muted start in 2024. Despite this, investor demand and pricing have remained strong due to Orange County’s high barriers to entry, with average cap rates in the mid-5 percent range and several significant transactions highlighting the market this year. This includes the April sale of an El Pollo Loco in Orange for $3.8 million …

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Chateau-de-Ville_Anaheim-Calif

— By Mark Bridge, Managing Director, Bridge Multifamily Team, Capital Markets, Americas, Cushman & Wakefield — Vacancy The vacancy rate is 4.0 percent as of the mid-point in the second quarter of 2024, up 30 basis points (bps) quarter-over-quarter (QOQ) and year-over-year (YOY). The rate has been increasing in eight out of the last 11 quarters from a market low of 2.1 percent in third quarter 2021. The rate is currently 40 bps above the five-year quarterly average of 3.6 percent. Despite this recent increase, Orange County’s vacancy rate is considerably lower than the national average at 7.7 percent. OC’s vacancy rate ranks it second lowest among the nation’s 50 largest markets. Rent The average asking rent per unit currently sits at $2,513 as of the mid-point in the second quarter of 2024. The market high asking rent per unit peaked in fourth 2023 at $2,530 and has come down 0.7 percent since then. Despite the recent decrease, the asking rent per unit is still up 0.9 percent YOY. Given the tightness of the market and a healthy development pipeline, it is likely that the asking rent will remain elevated. Construction/Deliveries There are currently 23 buildings or 8,183 units under …

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