Quantcast

North Bay Business Journal

Monday, March 12, 2012, 6:30 am

Santa Rosa office rents rise amid absorption

Top quality space remains in highest demand

By Dave Peterson, Keegan & Coppin Co., Inc.

Print Friendly Print Friendly    

Share this item

    Dave Peterson

    SANTA ROSA — The office market in the North Bay’s largest city appears to have stabilized as tour activity and closed transactions have increased substantially compared to 2008-2010 levels. Property owners continue to compete for tenants at rental rates 10 percent-20 percent below the market peak, but competition appears to be that of a more typical market rather landlord desperation seen in recent years.

    This new-found confidence seems to be fueled by more positive economic news on corporate profits and hiring on both the local and nationwide levels. However, it has not yet shown up in the vacancy and absorption numbers. Fourth-quarter Santa Rosa office direct and sublease vacancy was about 16.6 percent, up slightly from 16.2 percent in the third quarter and up considerably from 15.4 percent in the fourth quarter 2010.

    Throughout 2011, most larger transactions consisted of tenants renewing leases at existing locations: Triquint in 14,000 square feet, Santa Rosa Memorial Hospital in 13,000 square feet, Merrill Lynch in 11,000 square feet, New York Life in 9,700 square feet and Sonoma Bank in 7,000 square feet.

    Much of the remaining activity consisted of tenants making lateral moves into less than 5,000 square feet, from one location to another without much growth.

    Similar to vacancy, rental rates have remained fairly flat at the end of 2011 but started increasing in early 2012 in higher-quality properties downtown and in the Fountaingrove northeast area. The combined vacancy of those properties — 9.9 percent —  is substantially less than the 16.6 percent rate for the overall Santa Rosa market. These highest quality properties are demanding monthly per-square-foot full-service rental rates from $1.90 to $2.20, while the balance of the market remains in the $1.50 to $1.75 range with a few anomalies.

    Typical of recovering markets, we anticipate the highest-quality properties to have the opportunity to continue achieving much higher rents, while it will take some time and absorption of lower-class inventory before we see substantial increases in those rents.

    The Santa Rosa office rental rates will continue to increase in the near term as the best opportunities are absorbed. This is the time for companies to be analyzing the suitability and expense of their facilities and to take advantage of the opportunities in this recovering market.

    Copyright © 1988–2014 North Bay Business Journal
    View the policy for linking to website content.

    Print Friendly Print Friendly    

    Submit Your Comments

    Required

    Required, will not be published

    Comments are moderated and generally will be posted if they are on-topic and not abusive. For more information, please see our Comments and Letters Policy. To share this item by email or social media, use the links above.

    Do not use this form to contact people, companies or organizations mentioned in this story. Contact them directly. Private messages left here will be deleted.