Economic Development Update Series Part 2: Commercial Real Estate and Vacancy Trends

By SLNext
In Uncategorized
Mar 24th, 2016
11 Comments
4649 Views


On March 14, 2016 Business Development staff presented an Economic Development Update to the City Council, providing an overview of recent economic activity and trends, as well as the impact of ongoing and future developments in San Leandro. The update looked at how economic factors have changed, and in most cases improved, since the depths of the recession in 2010.  This is the second in a series of three posts designed to provide a snapshot of San Leandro’s current economic status. Click on the images to see enlarged versions.

Part 2: Commercial Real Estate and Vacancy Trends

This post examines changes in the commercial real estate market, as measured by the vacancy rate and rental rate. Vacancy rate is the percentage of total building space in a sector that is unoccupied at a given time.  Rental rate is the number of dollars per square foot of building space that tenants pay per year. As demand for commercial buildings increases, the vacancy rate generally decreases and rental rate increases.  This trend can bring greater investment in local buildings and improvement in the quality of businesses and jobs in the area.

NOTE: Vacancy rate is shown in blue, with percentages marked on the left side of the graph.  Rental rate is shown in red, with dollar amounts marked on the right side of the graph.

Vacancy Rates - Warehouse

  • Warehouses are a large part of San Leandro’s commercial building stock, with around 16.5 million square feet of space in the City.
  • However, very little of that space is currently available for rent or sale.
  • The warehouse vacancy rate is around 1%, down from a 7% vacancy rate in 2010.
  • As less space is available, the price to rent that space is increasing, from $6 per square foot per year in 2010 to $9 in 2015.
  • With very low vacancy and high rents, interest in constructing new warehouse space is increasing.

Vacancy Rates - Manufacturing

  • San Leandro has around 4 million square feet of manufacturing space.
  • A similar trend of low vacancy rates and higher rents is occurring in the manufacturing market.
  • Vacancy rate has decreased from 9% in 2010 to 2% in 2015.
  • Rental rate has increased from $5 per square foot per year in 2010 to $8 in 2015.
  • There is more fluctuation in the manufacturing vacancy rate because there is less manufacturing space in the local market and the buildings are large.  The vacancy of one 150,000 square foot building can have a visible impact on the vacancy rate.

Vacancy Rates - Retail

  • San Leandro has around 6 million square feet of retail space.
  • Vacancy rate has decreased from 3.8% in 2010 to 2.2% in 2015.
  • Rental rate has increased from $16 per square foot per year in 2010 to $18 in 2015.
  • While on average the rental rate has not returned to pre-recession levels, rent in new commercial buildings and downtown areas has exceeded the 2006 peak level of $24 per square foot per year.

To read the first part in this series, click HERE.

To read the third part in this series, click HERE.

 

11 Responses to “Economic Development Update Series Part 2: Commercial Real Estate and Vacancy Trends”

  1. […] To read the next part in this series, click HERE. […]

  2. real-estate says:

    Focusing on data base has become such a necessity today especially in today’s data driven technology and internet with millions and billions data storage capacity into various storage points. Its good to see this article start with data set point.

  3. Buying property is tantamount to disaster. From dodgy tenants to the endless repair costs, the property owner will always need to be on hand to deal with whatever mishap has befallen their investment.

  4. Great post on REITS! I have invested in a retirement home REIT, and it’s the only one of my investments that has not gone down since the market started doing badly. Sooo, best decision i think i could have made! Definitely interested in looking into another one though, since buying a house is not really an option for me right now.

  5. I’m a little surprised at how interesting your content is. I’ve tried to locate clear information on this topic many times.

  6. fazwaz says:

    These real estate agents want to play with people till they are satisfied with it. I do not know why they do that. If they really want something from their consumer, they should have just let them know about the fact rather than doing such thing

  7. lisa says:

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  8. lisa says:

    I am interested in, but I think I would rather start small first. I’m hoping (way down the road) to buy a house with a basement that we can rent out. Just to get a feel for it and see if it’s something I would really like to do. It requires a lot of effort and money, and I would hate to invest so much only to find out it’s too much to deal with. You should write a post about the tenant taking you to court! Some people.For more information about real estate click this link

  9. zack smith says:

    Hello!
    Great article with some great content one investment strategy i am seeing more frequently in seniors is downsizing into a duplex and renting the other side for the rental income

  10. home hunting says:

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