Tipping point?

| February 16, 2011 | 1 Comment

Here’s a phrase that I dont use very often: I really enjoyed our sales meeting this morning.

Over the past few years, most of our internal conversations have been built around small transactions, new vacancies, etc. Not much to talk about, and much of that bad. In recent months, though, the tenor of my conversations with colleagues and competitors has taken a marked turn. A lot of talk (in said enjoyable sales meeting) today about drastic pending drops in available space in some developers portfolilo, about long-term problematic vacancies in certain buildings getting absorbed. Asking rates going up in most of the Class ‘A’ markets that havent already seen upward pressure.

Most notably, a lot of big tenant requirements out in the market, and many of them are starting to land.

In our most recent Quarterly Market Report, I speculated in my Office Market writeup that we could be looking at a shortage locally for space to accomodate larger tenants. I think that there’s little doubt of this at this point, despite the still relatively high vacancy rate (and it is worth pointing out that even in the frothy market at the end of ’07, the Peninsula vacancy rate only barely and briefly dipped below 10%), large blocks of office space are going to be very tough to secure.

Its hardly bold at this stage to say we’ve reached a tipping point in the local market. I dont think that we’ll see a 10% vacancy rate this year, but there are plenty of better indicators to where the market is going. For starters, I expect 1Q 2011 to produce the strongest Gross Absorption since late 2007 (even excluding the monster Facebook deal in Menlo Park). Stay tuned…

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  1. Big deals driving the market | Opinion of Value | October 25, 2011

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