Intro: San Francisco and some of its surrounding areas have arguably remained the hottest real estate market in the country throughout the duration of 2014. So, what’s in store for the Bay Area real estate market as we head into the summer months and beyond? Using this latest Cassidy Turley market forecast (which we have become quite fond of here at The News Funnel), we put together a collection of ten thoughts to keep in mind if you’re considering making a real estate play in the Bay Area in the near future.
1. Projections for office growth are based on a number of different factors. These include the future plans for space users (for example, 18.1 million square feet of user space requirements for office and R&D space throughout the Bay Area that could land over the next 18 months are being tracked currently). The majority of these will end up as renewals, but growth requirements continue to increase in the region (driven by tech users) and general economic improvement continues to bring non-tech users beck into the fold as well.
2. A large number of deals in the works for Q4 will bring annual net absorption figures to roughly one million square feet and this will further drop the city’s combined office and life science vacancy rate.
3. Strong market growth is expected to continue throughout 2014 – driven overwhelmingly by tech users. South of Market trade areas will see the most activity, but all submarkets will see occupancy growth in the years ahead.
4. There will be an anticipated 1.1 million square feet in positive net absorption in 2014 – a number that may even prove to be conservative. Deal activity is also expected in increase as speculative new projects seek to line up tenancy for 2015 deliveries.
5. Looking ahead at the 2014 office market for San Mateo County, steady growth is expected. No large vacancies are anticipated to hit the market and no large transactions are expected to be completed, either. Class A rents may spike as much as 10%, but much more modest growth is expected for Class B and Class C office space.
6. There will be 3 million square feet of office and R&D growth for Santa Clara County in 2014, with an expected vacancy rate of 11.2% at year’s end. Rental growth is expected to be at 5% over the next year, but there will be staggered growth across the different classes, with Class A space seeing the greatest gains.
7. Deal volume in the East Bay office market is anticipated to be up significantly in 2014, but a few corporate consolidations will take their toll. While the East Bay Office market is expected to finish in the black, the combined total of office and R&D growth is forecasted to close at a mere 250,000 square feet.
8. Deal volume and occupancy growth for Marin and Sonoma County are expected to pick up, but only slightly.
9. As much as venture capital investment has continued to grow steadily in the region, that trend has been slow when compared to the explosion of capital that has poured into area businesses thanks to the massive jump in IPO activity that has taken place this year.
10.The Bay Area will continue to benefit from being at the forefront of growth and economic improvement in the United States thanks to its undisputed role as the epicenter of the world’s tech economy. At least for now…