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2014 Forecast

2014 Forecast

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    Market report Market report Document Transcript

    • Q4 2013 | INDUSTRIAL OAKLAND | CALIFORNIA RESEARCH & FORECAST REPORT Industrial Market Review I-80/I-880 Corridor Closes 2013 Strong with a Solid Fourth Quarter MARKET INDICATORS Q4-13 The I-80/I-880 Corridor Industrial Market ended the year with another strong quarter capping off an extremely positive 2013. Vacancy rates in the market decreased for the ninth consecutive quarter and landlords are seeing quality product leased or purchased shortly after being put on the market, often with competing offers which meet or exceed asking rates. Overall, there has been a significant decline in vacancy across all product lines, most notably in warehouse/distribution product which had an 8.1 percent vacancy rate a year ago versus its current 6.0 percent. Additionally, light industrial product and R&D/flex vacancy rates are presently down from 6.9 percent and 16.0 percent at this time last year to 5.3 and 13.7 percent respectively. Projected Q1-14 VACANCY Year-to-date net absorption for industrial, warehouse, and R&D/flex sectors for the I-80/I-880 Corridor is 2,769,786 square feet, a noteworthy increase from the year end net absorption in 2012 of 1,291,528 square feet. Both absorption and vacancy rates should continue to yield strong results projecting into 2014. NET ABSORPTION CONSTRUCTION RENTAL RATE SELECTED MARKET STATISTICS >> Year-to-date gross absorption is 8,721,518 square feet >> Vacancy this quarter was 6.3 percent compared to 6.9 percent last quarter >> Year to date net absorption is 2,865,866 square feet compared to 1,291,528 square feet at the end of 2012 Another notable statistic in comparison to a year ago is the amount of new construction taking place throughout the market. Nearly 1,000,000 square feet is currently in progress, up from 517,575 square feet at this time last year, and an additional 2,000,000-3,000,000 square feet is set to break ground in 2014. Asking rates for this new Class A product are expected to be in the $0.50-$0.55 NNN per square foot range. A subsequent result of the overall health of the market and steady decline in vacancy rates is an upward trend in the average asking rates for available properties. Rates edged up in the fourth quarter, as they did in the first three quarters of 2013 and have risen by 7-10 percent per square foot since this time last year. VACANCY VS. ASKING NNN RENTAL RATES I-80/I-880 CORRIDOR | OVERALL INDUSTRIAL MARKET 12% $0.60 10% $0.55 8% $0.50 6% $0.45 4% $0.40 2% $0.35 0% $0.30 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate www.colliers.com/oakland 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent Vacancy has decreased in the fourth quarter of 2013 for the ninth consecutive quarter with positive rental growth. A trend we expect will continue into 2014.
    • RESEARCH & FORECAST REPORT | Q4 2013 | INDUSTRIAL (continued from page 1) User sales remain active as tenants continue to seek and purchase product while financing rates remain at historic lows, nearly unchanged since the first three quarters of the year. A total of five user purchases greater than 25,000 square feet closed in the fourth quarter. Likewise, investment sales remain plentiful as investors continue to pursue product with long term existing leases in place from high credit tenants. Cap rates on these transactions are at historically low levels (5.5-6.5 percent), a further sign of the general health of the market. For the first time since the late 1990’s speculative development has emerged as the demand for Class A product is outweighing the current supply in the market. This demand, along with the positive leasing activity exhibited quarter by quarter in 2013 prompts high levels of optimism that these upward trends will continue into 2014 throughout the I-80/I-880 Corridor Industrial Market. VACANCY VS. ASKING NNN RENTAL RATES I-80/I-880 CORRIDOR | WAREHOUSE/DISTRIBUTION 12% $0.50 10% $0.45 8% $0.40 6% $0.35 4% $0.30 2% $0.25 0% $0.20 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent VACANCY VS. ASKING NNN RENTAL RATES VACANCY VS. ASKING NNN RENTAL RATES I-80/I-880 CORRIDOR | R&D/FLEX MARKET I-80/I-880 CORRIDOR | LIGHT INDUSTRIAL 24% $1.10 20% $1.00 16% $0.90 12% $0.80 8% $0.70 4% $0.60 0% $0.50 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent 9% $0.65 8% $0.60 7% $0.55 6% $0.50 5% $0.45 4% $0.40 3% $0.35 2% $0.30 1% $0.25 0% $0.20 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent 26250 CORPORATE AVENUE, HAYWARD This 108,604 square foot property sold to KZ Kitchen Cabinets and Stone in December 2013, representing the largest user sale of the quarter in the I-80/I-880 Corridor industrial market P. 2 | COLLIERS INTERNATIONAL - OAKLAND
    • RESEARCH & FORECAST REPORT | Q4 2013 | INDUSTRIAL RICHMOND The Richmond industrial market saw a decrease in vacancy this year to 6.8 percent, down from 10.8 percent the previous year, with positive absorption in light industrial and warehouse/distribution sectors. Light industrial vacancy has dropped to 6.6 percent from 11.4 percent a year ago, and warehouse/distribution vacancy is presently 6.3 percent compared to 8.2 percent in 2012. We expect vacancy rates to continue tightening as we enter 2014 as leasing activity continues to flourish in functional space. The majority of vacant space in Richmond is made up of older, dysfunctional space which lies dormant quarter after quarter. Regional economic growth has fueled a high demand for Class A space in Richmond driven by tenants from Berkeley, Emeryville, and Marin County who are forced into Richmond as available space diminishes in neighboring markets. Richmond is an attractive market due to its relatively low rates and access to Marin County and the Port of Oakland. R&D/ flex vacancy rates have declined to 7.6 percent, down from 13.3 percent at this time in 2012, though flat in the fourth quarter, year-to-date absorption was 194,702 square feet. Asking rental rates for all product types have remained closed to flat or slightly increased over the last year, light industrial moving from $0.52 to $0.53 NNN psf/mo, warehouse/ distribution from $0.28 to $0.30 NNN psf/mo, and R&D/flex average asking rates presently $0.73, up from $0.71 NNN psf/mo. Rents are projected to increase into 2014 as more and more developers look to break ground on new Class A projects. At Pinole Point Business Park, there is a planned development of 500,000 square feet of state of the art Class A warehouse/distribution buildings. With an abundance of land available, a strong demand for Class A space, and an active developer interest we foresee improving conditions and speculative development of warehouse/ distribution product. We expect to post strong numbers in 2014 as there are several large tenants looking for space in the I-80 Corridor and interest is increasing in build-to-suit activity in the Richmond market. 1 2 San Francisco Bay 3 4 5 SUBMARKET MAP KEY 1 Richmond Hercules, Pinole, Richmond, San Pablo, El Cerrito Oakland, Alameda San Leandro, San Lorenzo 2 Oakland 3 San Leandro 4 Hayward Hayward 5 Union City Union City 675 Alfred Nobel Drive, Hercules LEASE AND SALES ACTIVITY LEASE ACTIVITY PROPERTY ADDRESS LEASE DATE SIZE TENANT TYPE 675 Alfred Nobel Drive, Hercules December 2013 16,397 PTRL West Light Industrial VACANCY VS. ASKING NNN RENTAL RATES VACANCY VS. ASKING NNN RENTAL RATES RICHMOND | WAREHOUSE/DISTRIBUTION RICHMOND | LIGHT INDUSTRIAL VACANCY VS. ASKING NNN RENTAL RATES RICHMOND | R&D/FLEX 14% $1.10 $0.55 12% $1.00 $0.50 10% $0.90 8% $0.80 6% 12% $0.60 16% $0.40 24% 20% 16% $0.70 4% $0.60 2% $0.50 $0.35 4% $0.45 $0.40 4% $0.30 12% 8% 8% $0.35 $0.25 0% $0.20 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent 0% $0.30 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent $0.40 0% 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent COLLIERS INTERNATIONAL - OAKLAND | P. 3
    • RESEARCH & FORECAST REPORT | Q4 2013 | INDUSTRIAL OAKLAND Vacancy in the Oakland industrial market increased to 6.2 percent from 5.9 at the end of 2012. Light industrial vacancy was flat at 5.6 and warehouse/distribution vacancy increased to 7.3 percent from 6.5 percent. There is a high demand for industrial real estate in Oakland; it is geographically one of the most desirable locations for owner/users in the East Bay, however the quality of space is not up to par with that of its neighboring submarkets. Leasing activity has also slowed because inventory is tight and there is a lack of developable space. We expect to see changes in vacancy rates and a positive progression in absorption numbers in the early half of 2014, as construction of the Goodman Logistics Center at 8350 Pardee Street, a 374,725 square foot Class A warehouse/distribution facility, is completed and available for lease. Other notable spaces that have come on the market this quarter are 39 4th Street, 46,092 square feet of warehouse/distribution and 845 92nd Street, 35,500 square feet of warehouse and manufacturing on 4.12 acres of land. 1 2 San Francisco Bay 3 4 5 SUBMARKET MAP KEY 1 Richmond Hercules, Pinole, Richmond, San Pablo, El Cerrito Oakland, Alameda San Leandro, San Lorenzo 2 Oakland 3 San Leandro 4 Hayward Hayward 5 Union City Union City industrial rates have increased to $0.53 from $0.47 NNN psf/mo since the outset of the year. As vacancy declines, we see upward pressure on rents in light industrial product. Higher quality product is available in Oakland’s neighboring markets to the south along the I-880 Corridor but Oakland remains the sought after location for many users. Warehouse/ distribution rates have decreased to $0.41 from $0.42 NNN psf/mo. Overall net absorption in 2013 was negative 88,653 square feet with only a moderate amount of leasing and user sale activity. Though absorption this quarter was negative, we do not see it as indicative of a long term trend. We are hopeful that investment activity will pick up as rates continue to increase and vacancy remains low. Leases this quarter include 22,200 square feet at 515 Independent Road by East Bay Glass, 17,000 square feet leased by John Murray Productions at 3109 Adeline Street and EB Ford moved into 15,360 square feet at 70 Hegenberger Loop. Renewals include Johnstone Supply on 21,299 at 333 Market. Asking rental rates have increased over the course of 2013 ending the year at $0.49 NNN psf/mo compared to $0.45 last year. Light LEASE AND SALES ACTIVITY LEASE ACTIVITY PROPERTY ADDRESS LEASE DATE SIZE TENANT TYPE 515 Independent Road, Oakland December 2013 22,200 East Bay Glass Light Industrial 3109-3115 Adeline Street, Oakland October 2013 17,000 John Murray Productions Warehouse/Distribution 70 Hegenberger Loop, Oakland November 2013 15,360 EB Ford Light Industrial 2525 Mandela Parkway, Suite B, Oakland October 2013 10,000 SF Enterprises Light Industrial VACANCY VS. ASKING NNN RENTAL RATES VACANCY VS. ASKING FULL SERVICE RENTAL RATES VACANCY VS. ASKING FULL SERVICE RENTAL RATES OAKLAND | WAREHOUSE/DISTRIBUTION OAKLAND AIRPORT | LIGHT INDUSTRIAL 16% $0.44 7% $0.58 14% $0.42 6% $0.54 12% $0.40 5% $0.50 10% $0.38 4% $0.46 8% $0.36 3% $0.42 2% $0.38 $0.34 6% $0.34 4% $0.32 2% $0.30 1% $0.28 0% 0% 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate P. 4 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent | COLLIERS INTERNATIONAL - OAKLAND $0.30 1Q 2012 2Q 2012 3Q 2012 Vacancy Rate 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent
    • RESEARCH & FORECAST REPORT | Q4 2013 | INDUSTRIAL SAN LEANDRO Vacancy in the San Leandro industrial submarket has decreased over the course of 2013, dropping from 5.8 percent overall at the end of last year to 4.4 percent presently. The most dramatic decrease in vacancy was in the R&D/flex sector where vacancy went from 12.0 percent to 7.4 percent, with positive 38,487 square feet of net absorption. Warehouse/distribution vacancy went from 4.9 to 3.2 percent with a positive net absorption of 247,963 square feet, the majority of space leased in the fourth quarter. Leasing activity is high among both users and investors. As demand continues to outpace supply available in neighboring markets, users are moving south along the I-880 Corridor leasing up the remaining vacant spaces available in San Leandro. Overall asking rental rates have increased, rising from $0.45 to $0.50 NNN psf/mo year over year. Heavy leasing activity in warehouse/distribution markets has forced upward pressure on rates. Warehouse/distribution asking rates are presently $0.43 compared to $0.36 NNN psf/ mo at the outset of the year. After experiencing a drop in rental rates after a slow 2012, the R&D/flex sector has been revived with rents back up to $0.85 from $0.67 NNN psf/mo. Light industrial asking rates are presently stagnant at $0.51 NNN psf/mo remaining the same since the beginning of the year. We expect rental rates to increase for all product categories by 6-10 percent in 2014 and possibly further for the most functional product. Overall gross absorption was positive with a 32 percent increase over year-end 2012, the majority of spaces absorbed being larger blocks of warehouse/distribution space. In the fourth quarter, East Bay Logistics leased 105,450 at 1800 Merced Street and NBC Packaging took 62,761 square feet at 1525 Alvarado Street. User sales include 40,051 square feet of light industrial space to Alco metals at 1588 Doolittle Drive earlier this year and 26,400 square feet to Bulling Metal Works at 459 Hester. Significant leasing activity this year and an increase in tour activity points to strong net absorption going into 2014. Investment transactions were strong in 2013, characterized by a combination of owner/user, re-development, and asset acquisitions. KTR Capital Partners, an investor, purchased the entire Simmons Complex, a Class B/C multitenant leased investment of 513,000 square feet at 1700 Fairway Drive and 1400 Factor Avenue. In addition, a total of 73,263 square feet of light industrial space at 492-693 Hester sold to an investor at the start of the quarter. We expect this trend to continue in 2014 as the San Leandro market continues to retain low vacancies and experience rental rate growth. In response to the high demand for warehouse space, planned construction and development has increased. Preferred Freezer is building nearly 250,000 square feet of state of the art full service temperature controlled Class A warehouse at 400 Polar Way, San Leandro. We expect the 50 million dollar facility will be completed by the second quarter of 2014. Kaiser Permanente San Leandro Medical Center is expected to complete its 1 billion dollar 1 2 San Francisco Bay 3 4 5 SUBMARKET MAP KEY 1 Richmond Hercules, Pinole, Richmond, San Pablo, El Cerrito Oakland, Alameda San Leandro, San Lorenzo 2 Oakland 3 San Leandro 4 Hayward Hayward 5 Union City Union City 711,000 square foot, six-level, phase one of the hospital campus along Merced Street in the fourth quarter of 2014. Nearly 25 acres of the 63 acre site is still open for additional Kaiser Permanente development or probable high-end retail, hotel or mixed use type development. LEASE AND SALES ACTIVITY LEASE ACTIVITY PROPERTY ADDRESS LEASE DATE SIZE TENANT TYPE 2350 Williams Street, San Leandro November 2013 94,275 Zinus Warehouse/Distribution 2020 Williams Street, Suite E, San Leandro November 2013 71,489 Sirio North America Manufacturing 1525 Alvarado Street, Building E, San Leandro November 2013 62,761 NBC Packaging Warehouse/Distribution 1250 Business Center Drive, Building C, San Leandro November 2013 26,500 Cornerstone Marble Warehouse/Distribution SALES ACTIVITY PROPERTY ADDRESS SALE DATE SIZE BUYER TYPE 1400-1420 Doolittle Drive, San Leandro December 2013 15,010 A-Para Transit Light Industrial VACANCY VS. ASKING NNN RENTAL RATES VACANCY VS. ASKING NNN RENTAL RATES SAN LEANDRO | WAREHOUSE/DISTRIBUTION SAN LEANDRO | LIGHT INDUSTRIAL 7% $0.50 6% $0.45 VACANCY VS. ASKING NNN RENTAL RATES SAN LEANDRO | R&D/FLEX $0.40 4% $0.55 10% $0.50 8% $0.45 6% 5% 12% $0.40 4% $0.35 $0.35 3% $0.30 2% $0.25 1% $0.20 2% $0.30 0% $0.15 0% $0.25 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent 18% $1.05 16% $1.00 14% $0.95 12% $0.90 10% $0.85 8% $0.80 6% $0.75 4% $0.70 2% $0.65 0% $0.60 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent COLLIERS INTERNATIONAL - OAKLAND | P. 5
    • RESEARCH & FORECAST REPORT | Q4 2013 | INDUSTRIAL HAYWARD Overall vacancy has trended down in all three submarkets since the fourth quarter of 2012. There were drastic improvements in both light industrial and warehouse/distribution vacancy numbers. Current light industrial rates are 4.5 percent compared to 7.6 percent last year and warehouse/distribution vacancy 6.8 percent compared to 9.5 percent. While R&D/flex vacancy lagged with negative 181,089 square feet of absorption and increased vacancy rate of 17.0 percent versus 13.1 percent last year. This increase in vacancy is attributed to over four blocks of R&D/flex space above 20,000 square feet coming onto the market this year. We expect a continued decrease in vacancy rate consistent with regional economic growth. Hayward’s close proximity to San Francisco and Silicon Valley will continue to warrant national and international companies to consider the location. 1 2 San Francisco Bay 3 4 5 SUBMARKET MAP KEY 1 Richmond Hercules, Pinole, Richmond, San Pablo, El Cerrito Oakland, Alameda San Leandro, San Lorenzo Overall asking rental rates appear relatively stable, presently $0.46 compared to $0.47 NNN psf/mo year over year; there has been a slight increase in the light industrial and warehouse/ distribution sectors, while the R&D/flex market experienced a significant decrease. Light industrial asking rates are presently $0.51 NNN psf/mo compared to $0.50 NNN psf/mo and warehouse/distribution asking rates are $0.39 compared to $0.38 NNN psf/mo at the outset of the year. R&D/flex asking rates have dropped from $0.70 to $0.55 NNN psf/mo. We expect both asking rates and completed lease rates to 2 Oakland 3 San Leandro 4 Hayward Hayward 5 Union City Union City trend upwards with fewer concessions over the first half of 2014. With historically lower rental rates and shrinking vacancies in neighboring submarkets, we anticipate increased activity from users migrating south along the I-880 Corridor. Hayward fared well in 2013, boasting one of the most active fourth quarters in the I-80/I-880 Corridor industrial market. Net absorption for the year was 899,262 square feet, majority being large warehouse spaces in the fourth quarter. Nor-Cal Moving leased 333,302 square feet at 3129 Corporate, scheduled to commence in the first quarter of 2014, Airport Appliance took 151,630 square feet at 3525 Arden Road and Induspac moved into 87,500 square feet at 21062 Forbes Street. Many local tenants renewed or expanded on large blocks of space. Gexpro renewed on 123,000 square feet in Peppertree Industrial Center and Purcell Murray expanded into a 61,000 square foot space at 2351 Lincoln Avenue. Hayward’s thriving warehouse market has caught investor attention with KTR Capital Partners acquisition of a 215,000 square foot manufacturing space at 31775 Hayman, and 150,000 square feet purchased by Brad Management at 30526 San Antonio Street. We expect investment activity to increase in 2014 as rents continue to rise and demand expands to all tenant size ranges. LEASE AND SALES ACTIVITY LEASE ACTIVITY PROPERTY ADDRESS LEASE DATE SIZE TENANT TYPE 3129-3147 Corporate Place October 2013 333,302 Nor-Cal Moving and Storage Inc. Warehouse/Distribution 3525 Arden Road, Hayward November 2013 151,389 Airport Appliance Warehouse/Distribution 21062 Forbes Street, Hayward December 2013 87,500 Induspac Warehouse/Distribution 2816 West Winton Avenue, Building 2, Hayward October 2013 82,157 EDE Warehouse/Distribution PROPERTY ADDRESS SALE DATE SIZE BUYER TYPE 26250 Corporate Avenue, Hayward December 2013 108,604 KZ Kitchen Cabinets and Stone Warehouse/Distribution 26587 Corporate Avenue, Hayward December 2013 47,637 Agio Light Industrial SALES ACTIVITY VACANCY VS. ASKING NNN RENTAL RATES VACANCY VS. ASKING NNN RENTAL RATES HAYWARD | WAREHOUSE/DISTRIBUTION HAYWARD | LIGHT INDUSTRIAL VACANCY VS. ASKING NNN RENTAL RATES HAYWARD | R&D/FLEX 20% $0.50 10% $0.60 16% $0.45 8% $0.56 8% $0.35 6% $0.52 4% $0.30 2% $0.44 0% $0.25 0% $0.40 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate P. 6 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent | COLLIERS INTERNATIONAL - OAKLAND $0.70 $0.60 $0.50 4% $0.40 $0.48 4% 1Q 2012 $0.80 16% 8% $0.40 $0.90 12% 12% 24% 20% 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent 0% $0.30 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent
    • RESEARCH & FORECAST REPORT | Q4 2013 | INDUSTRIAL UNION CITY Rents in the Union City industrial market are steady as vacancy continues to decline. Vacancy in Union City continues to be the lowest of all submarkets in the region, vacancy is presently 3.8 percent, down from 8.9 percent at this time in 2012. There has been a significant decrease in vacancy across all product lines; in the light industrial sector vacancy is presently 1.8 percent, compared to 5.5 percent in the previous year. Warehouse/distribution ended the year at 4.8 percent compared to 11.9 percent last year and R&D/flex vacancy decreased to 13.8 percent compared to 15.9 percent. There is a growing demand for Class A space in Union City and 2013 improvements in the economy have resulted in a decline in large blocks for tenants. We expect vacancy to remain relatively stable, despite the addition of large blocks of Class A space within the next few months. These spaces include 70,800 square feet which just came on the market at 30300 Union City Boulevard; 146,880 square feet of warehouse/distribution space which will become available at 1600-1640 Atlantic Avenue in February of 2014. Leasing activity has increased and any Class A product that comes on the market will be quickly leased. Activity in the Union City market has picked up over the course of the year. Larger lease transactions this year include 45,976 square feet leased by Rapid Displays, 46,937 square feet leased by Maz Packaging, and 30,200 square feet leased to BHJ Products at Atlantic Court. Notable sales include Westcore’s acquisition of the Chronicle Facility on Pacific Street. Situated on 16.34 acres of land, Westcore plans to demolish the existing buildings and re-develop the facility into approximately 250,000 square feet made up of four buildings to be named the Alimento Business Park. We expect these activity levels to continue as the market remains stable and tenants try to sign new leases before significant rental rate growth occurs. The majority of tenants are coming from the I-880 market with a new flush of tenants and buyers relocating from the Peninsula due to cheaper rents/ sale prices and close proximity to the San Mateo Bridge as booming economies in San Francisco and the Silicon Valley drive rental rates up. Greatway Transportation relocated to Union City early fourth quarter, moving into a 32,000 square feet of light industrial product on Central Avenue. 1 2 San Francisco Bay 3 4 5 SUBMARKET MAP KEY 1 Richmond Hercules, Pinole, Richmond, San Pablo, El Cerrito Oakland, Alameda Overall asking rental rates have increased 10 percent due to low vacancy rates through most of the year. Rates are presently $0.51 compared to $0.46 NNN psf/mo at the end of 2012. Both light industrial and warehouse/ distribution rates have slightly increased over the course of the year. Light industrial average asking rates are presently $0.47 NNN psf/mo up from $0.45 NNN psf/mo and warehouse/ distribution $0.42 NNN psf/mo, up from $0.39 NNN psf/mo in 2012. R&D/flex rates have decreased to $0.85 NNN psf/mo from $0.95 San Leandro, San Lorenzo 2 Oakland 3 San Leandro 4 Hayward Hayward 5 Union City Union City NNN psf/mo. This decline in rental rates is attributed to a larger demand for light industrial and warehouse/distribution space and a lack of good quality R&D/flex space. We expect to see gradual improvements in rates over the first half of 2014 as vacancy remains low and activity levels continue to rise. LEASE AND SALES ACTIVITY LEASE ACTIVITY PROPERTY ADDRESS LEASE DATE SIZE TENANT TYPE 1570-1580 Atlantic Street, Suite 1580, Union City October 2013 46,937 Maz Packaging Light Industrial 33508 Central Avenue, Union City November 2013 29,964 Strapack Warehouse/Distribution 33508-33580 Central Avenue, Union City October 2013 25,878 Coremark International Warehouse/Distribution SALES ACTIVITY PROPERTY ADDRESS SALE DATE SIZE BUYER TYPE 33200-33220 Western Avenue, Union City October 2013 39,000 Dynatron Corporation Warehouse/Distribution VACANCY VS. ASKING NNN RENTAL RATES VACANCY VS. ASKING NNN RENTAL RATES UNION CITY | WAREHOUSE/DISTRIBUTION UNION CITY | LIGHT INDUSTRIAL VACANCY VS. ASKING NNN RENTAL RATES UNION CITY | R&D/FLEX 16% $0.45 12% $0.40 8% $0.35 10% $0.60 8% $0.55 6% 4% $0.45 $0.30 2% $0.40 0% $0.25 0% $0.35 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent $1.00 $0.95 $0.90 $0.85 8% $0.80 4% $0.75 $0.50 4% 1Q 2012 24% 12% $0.50 20% 16% 20% 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent 0% $0.70 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent COLLIERS INTERNATIONAL - OAKLAND | P. 7
    • RESEARCH & FORECAST REPORT | Q4 2013 | INDUSTRIAL NEWARK Leasing activity is up and vacancy has decreased significantly in the Newark market from a year ago as several large blocks of space, specifically in the R&D/flex market, were leased. Overall vacancy is 12.1 percent, down from 13.9 percent last year. R&D/flex vacancy alone has dropped to 17.0 percent from 24.6 percent and is expected to continue decreasing. Leasing activity will continue to increase as the market tightens and the regional economic growth of the San Francisco and Silicon Valley economies begins to push tenants into Newark. Light industrial vacancy has increased to 10.2 percent from 9.7 percent last year. Warehouse/distribution vacancy has increased to 9.9 percent from 9.2 percent. We expect vacancy rates to remain relatively steady over the next six months, with small improvements due to continued favorable conditions. 1 2 San Francisco Bay 3 4 5 SUBMARKET MAP KEY 1 Richmond Hercules, Pinole, Richmond, San Pablo, El Cerrito Oakland, Alameda San Leandro, San Lorenzo 2 Oakland Asking rental rates have remained relatively strong throughout the year, with a notable increase in the R&D/flex market, especially for Class A product, driven by strong activity through 2013. Overall rates are $0.72 NNN psf/mo compared to $0.67 NNN psf/mo last year. Asking rates in all product types have increased over the past year. R&D/flex rates are up 15 percent to $0.91 NNN psf/mo from $0.79 NNN psf/mo over the course of the year. Light industrial also increased to $0.68 NNN psf/mo compared to $0.61 NNN psf/mo, and warehouse/distribution rates have increased to $0.49 from $0.47 NNN psf/mo. We expect rates to remain flat, or slightly increase, as the market and economy strengthen causing vacancies to decrease. 3 San Leandro 4 Hayward Hayward 5 Union City Union City Total gross absorption in Newark for the year was higher than in 2012 for the overall Newark market, with the highest positive absorption in the R&D/flex sector. As in the larger market, the majority of transactions occurred in the first three quarters of 2013. Larger transactions this year include Moving Solutions 80,258 square foot lease at 7091 Central Avenue, VM Services renewed a 75,997 square foot lease at 6701 Mowry Avenue and DCT Industrial renewed on 90,000 square feet at 38505 Cherry Street. We expect activity to resume its pace of the first three quarters as major tenants in the market consider expanding and relocating within the market, the majority of them with purchase requirements. Development activity is strong in Newark with several projects planned or underway. 38811 Cherry Street is being redeveloped into a 575,000 square foot warehouse/distribution complex deliverable in 2014. Located between Oakland and San Jose, with land costs lower than most of its neighboring submarkets, Newark is becoming an optimum location for institutional developers and investors. 8145 Enterprise Drive, Newark LEASE AND SALES ACTIVITY LEASE ACTIVITY PROPERTY ADDRESS LEASE DATE SIZE TENANT TYPE 39684 Eureka Drive, Newark October 2013 16,529 Enecsys R&D/Flex 8145 Enterprise Drive, Newark November 2013 15,150 Fletcher Jones Motorcars Light Industrial VACANCY VS. ASKING NNN RENTAL RATES VACANCY VS. ASKING NNN RENTAL RATES NEWARK | WAREHOUSE/DISTRIBUTION NEWARK | LIGHT INDUSTRIAL VACANCY VS. ASKING NNN RENTAL RATES $0.60 NEWARK | R&D/FLEX 16% $0.55 16% $0.70 14% 20% $0.65 $0.50 8% $0.45 4% $0.40 0% $0.35 $0.55 $0.50 6% $0.45 4% 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate P. 8 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent | COLLIERS INTERNATIONAL - OAKLAND $1.20 40% $1.05 30% $0.90 20% $0.75 10% $0.60 $0.40 2% 1Q 2012 $1.35 50% $0.60 8% 12% 12% 10% 60% $0.35 0% $0.30 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent 0% $0.45 1Q 2012 2Q 2012 3Q 2012 4Q 2012 Vacancy Rate 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Average Asking Rent
    • RESEARCH & FORECAST REPORT | Q4 2013 | INDUSTRIAL INDUSTRIAL DEFINITIONS Total Rentable Square Feet: Direct Vacancy: Industrial space in buildings with 4,800 SF or greater of industrial space. Includes speculative as well as owner-occupied buildings. Excludes buildings that are functionally obsolete in addition to space that is under construction or renovation. Space in existing buildings that are vacant and immediately available during the quarter for direct lease or for sale, plus space that is vacant but not available for direct lease or sublease (for example, that is being held for a future commitment). Total Vacancy: Net Absorption: Space in existing buildings that are vacant and immediately available during the quarter for direct lease, for sublease or for sale, plus space that is vacant but not available for direct lease or sublease. Net change in occupied square feet from one period to the next (includes the impact of change in vacant space available for sublease). Sales and Leasing Activity: Weighted Average Asking Rental Rates: Square feet sold or leased for all known transactions completed during the quarter. Includes lease renewals and includes investment sale transactions. Weighted by square feet available for direct lease. Data is based on triple net rents, and excludes expenses such as taxes, insurance, maintenance, janitorial service and utilities. Reported on a monthly per square foot basis. Manufacturing: Warehouse: Includes buildings designed for the conversion or fabrication of goods. Buildings range in size from 20,000-250,000 square feet. Includes buildings of 50,000 square feet and greater with a minimum clear height of 16 feet. They have multiple dock-high doors and are primarily used for storage and/or distribution of goods. High-Cube Warehouse Distribution: Light Industrial: A subtype of warehouse buildings, high-cube buildings include buildings 50,000 square feet and greater with a minimum clear height of 26 feet. Typically the buildings provide dock-high doors at a ratio of one door per 10,000 square feet or more. Includes buildings in which the space is used primarily for development, service, production, storage or distribution of goods. Buildings range in size from 10,000-100,000 square feet. Under-Construction/Renovation: R&D Flex: Includes buildings that are in some phase of construction, beginning with foundation work and ending with the issuance of a Certificate of Occupancy. Also includes buildings that are undergoing substantial renovation. Includes buildings designed to allow its occupants flexibility of alternative uses, in a building with multiple tenants, usually in an industrial park setting. Buildings range in size from 4,800-25,000 square feet. Average Sales Price: Incubator: Calculated using a straight average of actual sales transactions. Includes buildings designed to allow alternative uses by multiple tenants who occupy less than 4,000 square feet. Buildings range in size from 4,800-25,000 square feet. COLLIERS INTERNATIONAL - OAKLAND | P. 9
    • RESEARCH & FORECAST REPORT | Q4 2013 | INDUSTRIAL NET ABSORPTION GROSS ABSORPTION I-80/I-880 CORRIDOR | OVERALL INDUSTRIAL MARKET I-80/I-880 CORRIDOR | OVERALL INDUSTRIAL MARKET 1,200,000 3,000,000 1,000,000 2,500,000 800,000 2,000,000 600,000 1,500,000 400,000 1,000,000 200,000 500,000 0 0 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1400 FACTOR AVENUE AND 1700 FAIRWAY ROAD, SAN LEANDRO KTR Capital Partners purchased the entire Simmons Complex a Class B/C multi-tenant leased investment in the fourth quarter of 2013 at approximately $55 per square foot. P. 10 | COLLIERS INTERNATIONAL - OAKLAND
    • RESEARCH & FORECAST REPORT | Q4 2013 | INDUSTRIAL MARKET COMPARISONS INDUSTRIAL MARKET SUBTYPE BLDGS TOTAL INVENTORY SF DIRECT VACANT SF DIRECT VACANCY RATE SUBLEASE VACANT SF SUBLEASE VACANCY RATE TOTAL VACANT SF VACANCY RATE CURRENT QUARTER VACANCY RATE PRIOR QUARTER NET ABSORPTION CURRENT QTR SF NET ABSORPTION YTD SF COMPLETED UNDER CURRENT QTR CONSTRUCTION SF SF AVG ASKING NNN RICHMOND Industrial Warehouse R&D/Flex Total 225 42 101 368 4,851,386 4,381,181 3,436,753 12,669,320 320,299 164,695 262,300 747,294 6.6% 3.8% 7.6% 5.9% 110,592 110,592 0.0% 2.5% 0.0% 0.9% 320,299 275,287 262,300 857,886 6.6% 6.3% 7.6% 6.8% 7.4% 5.7% 7.6% 6.9% 36,959 (26,095) 10,864 234,256 191,522 194,702 620,480 - - $0.53 $0.30 $0.73 $0.51 834 156 990 22,664,359 10,616,104 33,280,463 1,176,650 775,254 1,951,904 5.2% 7.3% 5.9% 97,600 97,600 0.4% 0.0% 0.3% 1,274,250 775,254 2,049,504 5.6% 7.3% 6.2% 5.5% 5.9% 5.6% (33,295) (149,458) (182,753) (4,825) (83,828) (88,653) - 374,725 374,725 $0.53 $0.41 $0.49 460 127 52 639 11,661,810 14,543,408 847,380 27,052,598 583,086 201,062 63,043 847,191 5.0% 1.4% 7.4% 3.1% 86,691 267,214 353,905 0.7% 1.8% 0.0% 1.3% 669,777 468,276 63,043 1,201,096 5.7% 3.2% 7.4% 4.4% 5.0% 4.6% 10.8% 5.0% (88,618) 204,392 28,429 144,203 88,213 247,963 38,487 374,663 - - $0.51 $0.43 $0.85 $0.50 784 214 107 1,105 16,504,507 21,078,545 4,579,872 42,162,924 615,952 934,350 779,315 2,329,617 3.7% 4.4% 17.0% 5.5% 128,640 505,956 634,596 0.8% 2.4% 0.0% 1.5% 744,592 1,440,306 779,315 2,964,213 4.5% 6.8% 17.0% 7.0% 5.3% 11.1% 16.0% 9.3% 122,671 903,478 (48,180) 977,969 517,211 563,140 (181,089) 899,262 - - $0.51 $0.39 $0.55 $0.46 Industrial Warehouse R&D/Flex Total NEWARK 162 80 14 256 7,883,678 7,187,526 870,672 15,941,876 132,260 303,646 120,071 555,977 1.7% 4.2% 13.8% 3.5% 6,500 60,933 67,433 0.1% 0.8% 0.0% 0.4% 138,760 364,579 120,071 623,410 1.8% 5.1% 13.8% 3.9% 3.0% 5.8% 13.3% 4.8% 95,593 55,059 (3,840) 146,812 293,880 492,729 12,172 798,781 - - $0.47 $0.42 $0.85 $0.51 Industrial Warehouse R&D/Flex Total 139 28 43 210 4,119,474 3,349,138 3,082,263 10,550,874 419,605 357,547 419,598 1,196,750 10.2% 10.7% 13.6% 11.3% 105,362 105,362 0.0% 0.0% 3.4% 1.0% 419,605 357,547 524,960 1,302,112 10.2% 10.7% 17.0% 12.3% 3.8% 6.0% 18.3% 8.7% (265,124) (157,079) 40,199 (382,004) (20,574) (48,104) 233,931 165,253 - 574,640 574,640 $0.68 $0.49 $0.91 $0.72 67,685,214 61,155,902 12,816,940 141,658,055 3,247,852 2,736,554 1,644,327 7,628,733 4.8% 4.5% 12.8% 5.4% 319,431 944,695 105,362 1,369,488 0.5% 1.5% 0.8% 1.0% 3,567,283 3,681,249 1,749,689 8,998,221 5.3% 6.0% 13.7% 6.4% 5.1% 7.4% 13.8% 6.9% (131,814) 830,297 16,608 715,091 1,108,161 1,363,422 298,203 2,769,786 - 949,365 949,365 $0.47 $0.40 $0.72 $0.52 5.4% 5.9% 6.0% 7.0% 7.6% 7.8% 8.4% 1,369,488 1,371,495 1,367,900 920,348 890,518 1,214,710 1,248,133 1.0% 1.0% 1.0% 0.7% 0.6% 0.9% 1.1% 8,998,221 9,713,312 9,887,974 10,892,213 11,650,807 12,338,240 13,104,052 6.4% 6.9% 6.9% 7.0% 8.2% 8.7% 9.2% 6.9% 6.9% 7.0% 8.2% 8.7% 9.2% 9.5% 715,091 758,594 444,713 765,812 32,424 2,769,786 2,054,695 1,880,033 758,594 1,291,528 846,815 114,388 117,200 - 949,365 975,015 975,015 1,092,215 517,575 517,575 25,650 $0.52 $0.51 $0.50 $0.48 $0.49 $0.48 $0.51 OAKLAND Industrial Warehouse R&D/Flex Total SAN LEANDRO Industrial Warehouse R&D/Flex Total HAYWARD Industrial Warehouse R&D/Flex Total UNION CITY MARKET TOTAL Industrial Warehouse R&D/Flex Total 2,604 647 317 3,568 QUARTERLY COMPARISON AND TOTALS Q4-13 Q3-13 Q2-13 Q1-13 Q4-12 Q3-12 Q2-12 3,568 3,568 3,568 3,567 3,567 3,568 3,358 141,658,055 141,658,055 141,658,055 141,540,855 141,540,855 141,783,575 141,783,575 7,628,733 8,341,817 8,520,074 9,971,865 10,760,289 11,123,530 11,855,919 COLLIERS INTERNATIONAL - OAKLAND | P. 11
    • RESEARCH & FORECAST REPORT | Q4 2013 | INDUSTRIAL OFFICE Aileen Dolby Senior Vice President +1 510 433 5815 aileen.dolby@colliers.com Scott Greenwood Vice President +1 510 433 5827 scott.greenwood@colliers.com Benjamin F. Harrison Senior Vice President +1 510 433 5852 benjamin.harrison@colliers.com Trent Holsman Senior Vice President +1 510 433 5859 trent.holsman@colliers.com Kenneth W. Meyersieck Managing Partner/EVP +1 510 433 5802 ken.meyersieck@colliers.com Danea Adams Assistant to Ken Meyersieck +1 510 433 5804 danea.adams@colliers.com Al Musante Vice President +1 510 433 5817 al.musante@colliers.com INDUSTRIAL Brennan Carpenter Senior Associate +1 510 433 5813 brennan.carpenter@colliers.com Kevin Hatcher Vice President +1 510 433 5818 kevin.hatcher@colliers.com Richard P. Keely Senior Vice President +1 510 433 5806 richard.keely@colliers.com Greig F. Lagomarsino, SIOR Executive Vice President +1 510 433 5809 greig.lago@colliers.com Mark Maguire Senior Vice President +1 510 433 5835 mark.maguire@colliers.com Nick Mascheroni Associate +1 510 433 5814 nick.mascheroni@colliers.com Nick Ousman Associate +1 510 433 5820 nick.ousman@colliers.com Casey Ricksen, SIOR Senior Vice President +1 510 433 5805 casey.ricksen@colliers.com Sean Sabarese Associate +1 510 433 5803 sean.sabarese@colliers.com Todd O. Severson, SIOR Senior Vice President +1 510 433 5810 todd.severson@colliers.com Justin Smutko Associate +1 510 433 5822 justin.smutko@colliers.com RETAIL Solomon Ets-Hokin Senior Vice President +1 510 433 5840 solomon.etshokin@colliers.com Reesa Tansey Senior Associate +1 510 433 5808 reesa.tansey@colliers.com Ramsey Wright Associate +1 510 433 5819 ramsey.wright@colliers.com ADMINISTRATIVE Catherine Arlin Operations Manager +1 510 433 5829 catherine.arlin@colliers.com Donna Thibeaux Administrative Assistant +1 510 433 5825 donna.thibeaux@colliers.com Chege Wanjiru Administrative Assistant +1 510 433 5801 chege.wanjiru@colliers.com RESEARCH Joe Yamin Senior Vice President +1 510 433 5812 joe.yamin@colliers.com Rishika Das Research Analyst +1 510 433 5836 rishika.das@colliers.com INVESTMENT/ PRIVATE CAPITAL GROUP MARKETING Kenneth W. Meyersieck Managing Partner/EVP +1 510 433 5802 ken.meyersieck@colliers.com Ryan Land Graphic Designer II +1 510 433 5845 ryan.land@colliers.com 482 offices in 62 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85 > $2.0 billion in annual revenue > 1.12 billion* square feet under management > Over 13,500 professionals *The combination of Colliers International and First Service results in 2.5 billion SF under management (2nd largest in the world.) COLLIERS INTERNATIONAL | OAKLAND 1999 Harrison Street Suite 1750 Oakland, CA 94612 TEL +1 510 986 6770 FAX +1 510 986 6775 MANAGING PARTNER Ken Meyersieck Managing Partner | Executive Vice President CA License No. 00939525 TEL +1 510 433 5802 RESEARCHER Rishika Das Research Analyst I TEL +1 510 433 5836 This report and other research materials may be found on our website at www.colliers.com/oakland. This report is a research document of Colliers International - Oakland, California. Questions related to information herein should be directed to the Research Department at +1 510 433 5836. 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. © 2014 Colliers International. Catherine Wong Assistant to Greig Lagomarsino +1 510 433 5843 catherine.wong@colliers.com Accelerating success. COLLIERS INTERNATIONAL - OAKLAND | P. 12