A surge in property sales has come as Marin County’s office market reaches maturity, and with that is coming higher rents and fewer space options.
Marin has among the lowest unemployment rates in the state and among the strongest paces for job growth. The joblessness rate was 3.5 percent in August, according to the state Employment Development Department. It ranked No. 2 behind San Mateo County in Silicon Valley. Marin’s rate was virtually unchanged from a year before.
Marin nonfarm jobs increased over 12 months by 3,500, or 3.1 percent, to 117,700.
Yet the office vacancy rate in Marin County has had fairly flat growth for more than five quarters, with percentages of available space ranging from the high 9s to the low 10s, according to Whitney Strotz, North Bay market leader for Cushman & Wakefield.
Of about 10 million square feet the brokerage tracks in the market, 10.3 percent was available in the third quarter, or around 1 million square feet.
The vacancy rate increased from 9.6 percent in the second quarter, he said. There were 59,000 square feet of negative absorption, meaning that much more space came on the market than was leased or sold.
That jump in vacancy is largely because of Fair Isaac Co.’s putting its entire 120,000-square-foot building on the market for sublease, up from 60,000 square feet.
“It had a little artificial impact on the numbers because they still exist there and still have a need for half the building,” Strotz said.
Most Marin tenants are not noticing it getting easier to find a new home locally — quite the opposite, Strotz said. There were 258 office suites available at the end of September, down from 275 in late June.
“We’re seeing the number of choices available to tenants going down, and that probably reflects the experience of tenants,” Strotz said.
LARGE LEASE REQUIREMENTS
North Marin has several space requirements for lease that could take a large part of the available inventory off the market, according to Haden Ongaro, who leads Newmark Cornish & Carey’s North Bay operations. Among the more sizable space needs looking in north San Rafael and Novato are a company seeking 40,000 square feet and two wanting 20,000 square feet.
“They will be taking inventory, and as spaces come off the market, there will be increased rental rates,” Ongaro said.
The 405,000-square-foot Hamilton Landing office development his company markets in Novato is up to 95 percent occupancy, with active negotiations for the last two 20,000-square-foot spaces.
“We expect it to be fully leased by the end of this year,” Ongaro said. “There have been only a couple times in its history that it’s been fully leased.”
Strotz sees several sizable space requirements in Marin of 15,000–80,000 square feet.
“Generally, they are local folks expanding, he said.
Health care, biotechnology and video game companies have been active tenants and buyers of property in Marin in the past few years. BioMarin Pharmaceutical, Ultragenyx and Raptor Pharmaceutical have occupied tens of thousands of square feet in Novato, and BioMarin has been moving into more industrial buildings around its main production plant in the Bel Marin Keys business park. BioMarin also acquired the 255,000-square-foot San Rafael Corporate Center and has been building structures and acquiring surround land for expansion.
Commercial Real Estate Guide