[caption id="attachment_50684" align="alignleft" width="180" caption="Whitney Strotz"][/caption]

SOUTHERN MARIN -- The best office spaces in southern and central Marin County are filling up, and the rest of the market is not far behind.

The overall vacancy rate for the central and southern part of the county now sits at 10 percent, and the asking rental rate has continued to climb over the past 12 months to $3.21 per rentable square foot on a full-service basis.

Many businesses have taken advantage of their leverage in the marketplace to improve the quality of space they have without significantly changing their occupancy costs -- leading to a "move-up" market dynamic. That leaves some of the lower-quality buildings sitting with extra vacancy. Generally, these buildings are left to compete only on price.

The result is we have owners of class B and C office buildings offering inexpensive rates to get businesses back and those with class A buildings raising rates on the few remaining spaces they have left. 

Over the last few years, San Rafael offered businesses a lower-priced alternative. At the end of 2011 we saw a couple of large transactions absorb a few hundred thousand feet of office space, namely the 120,000-square-foot lease late last year by BioMarin Pharmaceutical at San Rafael Corporate Center. We anticipate that will add further pressure on the southern and central parts of the county -- as well as raise pricing for the San Rafael area.

Looking farther into 2012, we are continuing to track demand that likely will absorb larger blocks of space. The continued decrease in supply is anticipated to continue to drive pricing upward. Business owners who are looking to renew leases in class A buildings likely will experience the most pain as landlords look to take advantage of their leverage in the market and push pricing on lease renewals. With limited choices available and landlords enjoying relatively full buildings, striking a balance may be challenging.