[caption id="attachment_89521" align="alignleft" width="202"] Whitney Strotz[/caption]
Rental rates for premium office space in central and southern Marin continue to increase, and the data indicates that trend will continue for the near term. As the limited supply of quality office space continues to decline, landlords continue to raise pricing.
Substantial pricing increases for office space in San Francisco, limited availability of quality space in Marin, and the improving economy have all contributed to the pricing dynamics.
Cassidy Turley is reporting San Francisco annual asking rents have increased nearly 65 percent from the recession lows and over 19 percent in the last year. Many San Francisco tenants are experiencing difficult renewal conversations that are encouraging them to consider alternative locations. And for executives who live in Marin County, locating their business here can reduce commute times, save on parking and transit costs, and eliminate gross-receipts tax.
By comparison, the average asking rate for office space across all building types in central and southern Marin increased 2.6 percent last year, to $3.53 per rentable square foot on a full-service basis in the fourth quarter from $3.44 a year before.High demand for space
Many of the top office projects in central and southern Marin County are nearly or completely full. Water view space and space with premium finishes is particularly difficult to find. Top real estate agents are tracking expiring leases and securing spaces for their clients before spaces are even being marketed to the broad market.
Across the tenant requirements we are tracking at Cassidy Turley, nearly 90 percent are for more space than currently occupied. In addition, we continue to track a steady flow of new tenants to the Marin market. With the recent change of direction for San Rafael Corporate Center after the purchase by BioMarin Pharmaceutical, we anticipate more tenants in the marketplace as renewals at that project become more difficult. This combination provides an increased demand that is impacting the balance of power.
Buildings that have not been recently updated and don't offer current, quality finishes are not following these trends and continue to struggle. As executives look for unique spaces that reflect the personality of their business and create a stimulating, productive work environment, not all buildings are doing great. Dark, dated, and dilapidated buildings continue to struggle. The "hidden" costs to upgrade these buildings' life-safety systems, accessibility features and core infrastructure make it difficult for them to compete without significant upfront investment from the property owners.
Finally, we have seen significant change in the ownership groups of several properties. Equity Office sold three of its six Marin properties. We anticipate the new owners will bring a passion and focus to their new investments, to go along with their stepped up cost basis. We look forward to their involvement in the community and support of a healthy business climate in Marin County.
