North Marin County office market stable, but some space eyed for housing
The North Marin market was stable over the last year, when comparing both vacancy rates and asking lease rates.
The market didn't experience a dip in asking lease rates, which occurred in several central and southern Marin office buildings. The vacancy rate in San Rafael and Novato finished the year at 17.5%.
There were also several significant decisions made in the past 12 months that could affect future office supply in North Marin.
In Novato, the former Fireman’s Fund campus sold this quarter to Bay West Development, a San Francisco-based firm, and Forum Investment Group. It was formerly used as 710,000 square feet of office space. Now the redevelopment is intended to go residential.
Additionally, San Marin Business Park in Novato, a 36-acre development opportunity originally proposed for 245,000 square feet of office space, appears now to be going residential.
The ownership of Hamilton Landing in Novato has also removed the proposed 52,000-square-foot office lot to add a tenant-amenity space to enhance the campus environment and support employee wellness.
The joint loss of 1,007,000 square feet of office space, on top of the already limited industrial space, means that commercial real estate supply is severely limited in northern Marin County.
Northern Marin is not the only submarket affected by this trend. San Rafael has seen several properties convert to residential or other uses. For example, 3773 Redwood Highway was approved to convert from retail to senior living. At 3833 Redwood Highway and 160 Mitchell Ave., former office space was just approved for residential. At 1201 E St., a hotel is being built after removing office space, and a former bank on Fourth Street is likely to go residential.
The lack of housing has long been a hindrance to attracting companies to northern Marin. This future housing supply in addition to public transportation linkage to San Francisco via the Larkspur Ferry and SMART address previous concerns for relocating companies.
3 models for post-pandemic commercial property
As organizations plan for post-pandemic operations, three models are becoming more clearly represented helping to influence the commercial real estate market future.
Nearly 40% of organizations are restructuring to “hub and spoke” models with smaller headquarters and satellite offices to support employees working closer to home. Another 36% will have a fully decentralized model where work from home will become the major part of the model. And the last 24% expect to return to the primary-office model of the pre-pandemic world.
Some of northern Marin property owners are creating attractive updated spaces to attract the hub-and-spoke opportunities. The 4000 Civic Center Drive property has received extensive outdoor amenity, lobby and building upgrades. Similarly at 4040 Civic Center Drive, new outdoor amenities and lobby enhancements along with a community conference room contribute to upgrades. Rowland Plaza has upgraded lobbies, while 100 Wood Hollow now has office renovations and outdoor amenities, including a putting green.
Marin office buildings are now on the radar screen of many companies considering relocation or a possible suburban satellite office. With virtually no new office supply in the horizon and upgrades to many of our class A projects, north Main is well poised to attract companies coming out of the pandemic.
Haden Ongaro is executive managing director and North Bay market leader from the San Rafael office of Newmark.