[caption id="attachment_70223" align="alignleft" width="200"] Haden Ongaro[/caption]

Despite 220,000 square feet of user-controlled inventory added to the market in Novato and San Rafael in 2012, net absorption of office space for the year was 46,000 square feet. For the Marin market as a whole, net absorption was slightly negative.

Absent unexpected new major additions of user-controlled space, we expect a continued gradual decrease in vacancy in 2013. Asking rents will edge higher as additional buildings raise asking rental rates.

With just more than 4 million square feet of class A office space, San Rafael and Novato has almost 78 percent of Marin County's class A inventory. Other than 66,000 square feet of vacancy at Shoreline Office Center, all major blocks of available office space over 25,000 square feet are located in San Rafael and Novato. 

At the end of the fourth quarter 2012 there was almost 1.4 million square feet of office space available in Novato and San Rafael -- a vacancy rate of 23.6 percent. Surplus user-controlled space represented 485,107 square feet of availability or 35 percent of available space in San Rafael and Novato.

Key in that figure are 272,504 square feet for sublease by Fireman’s Fund Insurance Co. at its Novato headquarters campus, 46,971 square feet for lease by Sutter Health at 100 and 101 Rowland Way, 120,000 square feet for sublease by Walt Disney at Hamilton Landing in Novato, and 45,632 square feet for sublease by Autodesk at 4040 Civic Center Dr.

The availability of these spaces has kept a lid on rent growth but class A direct asking rents have edged higher in the northern half of the county, from $2.42 a month at the beginning of 2012 to $2.46 in the fourth quarter.

San Rafael and Novato were the most active Marin cities in terms of square feet leased in 2012. Health care and digital entertainment companies continue to be the most active contributors to office leasing activity in Marin.

Three digital-arts companies significantly contributed to space absorption with major expansion. Take Two Interactive leased an additional 19,600 square feet at Hamilton Landing, and Activision-Blizzard leased an additional 8,900 square feet also at Hamilton Landing. Telltale Games leased 22,000 square feet at 4000 Civic Center Dr., outgrowing the 10,350 square feet it previously leased at 101 Glacier Point Dr. in Bayshore Business Park.

Managed Health Network extended its lease at 2370 Kerner Blvd. on approximately 52,454 square feet. Sutter has just exercised an option to renew 74,000 square feet. In addition, there are several large medical requirements looking to locate in San Rafael this year.