Marin County employers question how much space they need amid office return

Marin County’s office real estate market continues to suffer from indecision among tenants large and small about what the post-pandemic world of work will look like, but there was a change in the air as summer turned to fall.

“There was an uptick after Labor Day,” said Haden Ongaro, who oversees Newmark’s North Bay offices.

Since then, his Marin team of agents has seen a half-dozen inquiries from companies shopping for space. The requirements range from 3,000 to 12,000 square feet and cover multiple industries: a couple of law firms, two banks seeking non-retail branches, and a couple of medical firms.

While sizable leases were few in the third quarter, the Marin office market has been slowly improving throughout this year, according to Whitney Strotz in Cushman & Wakefield’s San Rafael office. The firm’s preliminary third-quarter figures point to a slight easing of vacancy countywide to 16.2% of 9.7 million square feet from 16.5% at mid-year. That’s better than the pandemic peak of 17% in the first quarter of this year but still above the 15.8% a year ago.

“There's still demand,” Strotz said. “It’s still thinner than it was pre-pandemic, and there are more options available for tenants today than there were pre-pandemic. But we're starting to see things come back and starting to see improvements.”

One positive sign is continued interest in Marin offices from business leaders in San Francisco.

“One of the things that we've all learned from the pandemic is that people don't like commuting,” Strotz said. “After a couple of years of not commuting, I think people are trying to find opportunities to avoid the commute.”

The pandemic and early attempts by employers to return to the office have made properties with outdoor amenities such as lunch areas attractive, Strotz and Ongaro said.

“It kind of make sense if you’ve asked employees to change what they've gotten used to after a couple of years, working from home, offering them something that that looks nice, has the amenities and has good energy, that makes it a lot easier,” Strotz said.

But some major Bay Area employers have learned that return to the office is not an easy sell. For example, Autodesk earlier this year announced that it is giving up its Marin County official headquarters after four decades in favor of San Francisco, partly because the company’s nearly 600 Marin employees already were mostly working remotely.

Downsizing office needs was a trend in Marin office real estate for decades before the pandemic showed that hybrid work schedules in and out of the office could reduce how much space even small businesses need, Strotz said.

“But people still do want to have an office,” Strotz said. “You want to be with your co-workers. There's inspiration and creativity and a lot of things that happen much easier in person.”

And larger companies that had been slow-rolling their Marin office lease renewals to see the trajectory of the pandemic are now poised to re-up in the fourth quarter, but generally for shorter terms, Ongaro said. Instead of the typical 10-year lease term for a sizable tenant, they’re wanting two or three years.

“They are trying to figure out how many are coming back to work,” Ongaro said. “Office counts are higher than they were over the summer, but there is still some uncertainty to how long it will take to get everyone back.”

Where the executives live is becoming a bit less important for office location scouting, especially in the current high-gasoline-price environment, Ongaro said.

“Some companies are considering Novato and Petaluma a little more strongly than before because the employees live there,” Ongaro said.

But with the pandemic still a concern and the prospects of more hybrid work, locating a business near a Sonoma Marin Area Rail Transit station doesn’t have the site-search priority that it did when the commuter rail line launched a decade and a half ago, according to Ongaro.

Jeff Quackenbush covers wine, construction and real estate. Before coming to the Business Journal in 1999, he wrote for Bay City News Service in San Francisco. Reach him at jquackenbush@busjrnl.com or 707-521-4256.