Class A product is going off the market fast in Northern California’s industrial basin. Older product is sitting on the market longer, while mid-sized spaces are still the East Bay’s bread and butter. Net absorption has been pegged on a negative trend due to new construction and the volume of deals slowing down. Certain products are giving concessions to compete with newer product, while some landlords are trying to push the market limits to see how heavy tenant’s pockets really are.
Kyle Phillips, NKF
Several significant leases were signed in the East Bay during the second quarter of 2019. The largest deal of the quarter belonged to Service West, a furniture installer that signed a renewal and expansion totaling 252,021 square feet in San Leandro at 2350 Williams Street. Javelin Logistics, a logistics and distribution provider, also inked a new lease for 134,279 square feet at 7091 Central Ave. in Newark. Confluent Medical had the largest research and development deal of the second quarter, totaling 65,385 square feet. The material science tech company renewed at 47513 Westinghouse Drive in Fremont.
The most significant investment sale of the second quarter occurred at 44100 and 44200 Osgood Road in Fremont. This is where Western Digital sold its 291,061-square-foot R&D campus to Angelo, Gordon & Co. for $117 million, or $402 per square foot. Mandel Management, a New York-based company, also purchased 37955 Central Court, a 43,557-square-foot R&D property, from TriveCapital for $10.2 million, or $239 per square foot. A 19,600-square-foot industrial building at 2214-2254 American Ave. in Hayward also sold for $3.7 million.
Fremont and Union City are seeing most of the new construction as tech companies require manufacturing space. Location is also a key driver as they are looking for spaces that are close to main highways and local BART stations. BART is starting to become a driver for local R&D and manufacturing. Many new sites are being built with this in mind to attract higher-skilled manufacturing workers. The Oakland Port and I-5 are still the main drivers from the Bay Area to reach the rest of the state.
Greater Oakland’s vacancy currently sits at 5.80 percent, while the average asking rental rate is $1.03 per square foot. Tech is also a large driver for Fremont as these sorts of companies are constantly looking to build new campuses that largely include manufacturing sites to stay close to their current headquarters.
— By Kyle Phillips, research coordinator, Newmark Knight Frank. This article first appeared in the September 2019 issue of Western Real Estate Business magazine.