Peninsula Market Update, 3Q 15

| October 19, 2015 | 0 Comments

525 Unversity Avenue, Palo Alto

Our 3Q 2015 Market report and forecast for the SF Peninsula is available HERE.  A preview of my article on the Office market follows:

The office vacancy rate on the Greater San Francisco Peninsula (includes San Mateo County, Palo Alto, Mountain View, and Los Altos) continues to find new historic lows, closing the third quarter of 2015 at a startling rate of 5.97%. San Mateo County broke the long term trend with a very nominal increase to 7.68%– for all intents unchanged from last quarter’s rate of 7.72%.  Perhaps surprisingly given the dearth of total space available on the market, gross absorption, a measure of all leasing activity in a market area, for the Greater San Francisco Peninsula remains robust. While the Gross Absorption total for San Mateo County of 707,506 square feet falls well below long term averages, the Greater Peninsula’s total remains robust. The broader market of the Greater SF Peninsula saw Gross Absorption of 1,325,358 square feet for the quarter, largely driven by strong leasing activity in Palo Alto (555,248 square feet)
While rent growth continues in the regions strongest markets, overall rates on the Peninsula remained essentially unchanged for the quarter. Slight retreats in some peripheral markets such as Burlingame and South San Francisco offset the 3% increase seen over the past quarter in Palo Alto and the 10% rise in Mountain View.
Despite the slower pace of absorption in San Mateo County, the 3rd quarter of 2015 brought some of the largest leases of the year. The most significant lease of the quarter—and one of the largest of the year—was SurveyMonkey’s 210,000 square foot relocation to San Mateo, kicking off Wilson Meany’s transit-oriented Bay Meadows Station development. Other substantial moves in the past quarter include Rovi’s 103,904 square foot sublease at the Circle Star Center in San Carlos and a pair of leases consummated by Palantir for 59,000 and 38,700 square feet in Downtown Palo Alto, two of the largest leases in that submarket this year.
With the flood of new construction on the Peninsula, larger users have been able to- for the time being- return to the market. We anticipate leasing activity to remain strong through the end of 2015 and beyond. With new product continuing to garner attention and the availability of volatile sublease inventory at historic lows, we expect rents to remain strong for the foreseeable future

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