Commercial Investment Real Estate Quarterly Market Recap: Q4 2012

Tanner Laverty  /   February 11, 2013

Good afternoon!  The new year is here and in full effect. There has been a lot going on in the world, not the least of which was the reelection of President Obama, which resulted in many changes in our tax code.  If you’ve been following our posts, you will have seen much of the changes that will effect your properties and ultimately, your income.  I know for a lot of our clients, the result was dismal, but hopefully the good economic news we have been hearing lately will lift those spirits. Around our office, we realize there is not much we can do about it, but move forward.  We’ve been hearing that general attitude has allowed a lot of companies and investors to move forward as well.  In short, now they know what’s going to happen and they can plan for it, so here’s to the best we can make it.

The fourth quarter figures are in and it’s interesting to see how the year turned out. Like always, I’ve included regional information regarding greater Sacramento, the South Bay such as vacancy rates, rental rates, total transactions and cap rates.  We’ve also expanded into Marin County this year so you will see I have included those figures as well.

Please remember this is REGIONAL data so the local area your property(s) reside in will have information that differ from the regional info.  Your buildings may also differ by class, location, desirability and demand so please give me a call to get more property specific, local market information. I’d be happy to discuss the various CoStar reports we get this information from.

 

Regional Market Info – Greater Sacramento

 

Retail

  • The vacancy rate has decreased from 9.9% in Q3 2012, to 9.6% in Q4 2012.
  • The average quoted asking rental rates have remained unchanged at$1.34/sf/m.
  • For buildings larger than 15,000 sf, in Q3 2012, 18 retail transactions closed with a total volume of $78,891,063. The 18 buildings totaled 667,675 square feet and the average price per square foot was $118.16.
  • Capitalization rates were higher in 2012, averaging 8.83% compared to 2011 at this time when they averaged 7.73%.

 

Office

  • The vacancy rate decreased from 16.6% in Q3 2012 to 15.9% in Q4 2012.
  • The average quoted asking rental rates have remained the same at $1.65/sf/m.
  • For buildings larger than 15,000 sf, in Q3 2012, 10 office transactions closed with a total volume of $22,701,000. The 10 buildings totaled 326,057 square feet and the average price per square foot was $69.62.
  • Capitalization rates were lower in 2012, averaging 6.26% compared to the same time in 2011 when they averaged 8.76%.

 

Industrial

  • The vacancy rate decreased from 13.6% in Q3 2012, to 13.2% in Q4 2012.
  • The average quoted asking rental rates have slightly increased from $.42/sf/m in Q3 2012, to $.43/sf/m in Q4 2012.
  • For buildings over 15,000 sf, in Q3 2012, 19 industrial transactions closed with a total volume of $81,343,287. The 19 buildings totaled 1,802,082 square feet and the average price per square foot was $45.14.
  • Capitalization rates were slightly lower in 2012, averaging 7.84% compared to the same time last year when they averaged 8.26%.

 

Regional Market Info – South Bay Area

 

Retail

  • The vacancy rate decreased from 4.9% in Q3 2012, to 4.8% in Q4 2012.
  • The average quoted asking rental rates decreased from $2.21/sf/m in Q3 2012, to $2.18/sf/m (NNN) in Q4 2012.
  • For buildings over 15,000, in Q3 2012, 4 retail transactions closed with a total volume of $23,850,000. The 4 buildings totaled 231,821 square feet and the average price per square foot was $102.88.
  • Capitalization rates are lower in 2012, averaging 6.28% compared to the same period in 2011 when they averaged 7.31%.

 

Office

  • The vacancy rate decreased from 11.6% in Q3 2012, to 11.3% in Q4 2012.
  • The average quoted asking rental rates have remained unchanged at $2.39/sf/m.
  • For buildings over 15,000 sf, in Q3 2012, 3 office transactions closed with a total volume of $97,907,710. The 3 buildings totaled 383,413 square feet and the average price per square foot was $255.36.
  • Capitalization rates are higher in 2012, averaging 6.49% compared to the same period in 2011 where they averaged 5.86%.

 

Industrial

  • The vacancy rate decreased slightly from 9.4% in Q3 2012, to 9.2% in Q4 2012.
  • The average quoted asking rental rates have increased slightly from $1.06/sf/m in Q3 2012, to $1.08/sf/m in Q4 2012.
  • For buildings over 15,000 sf, in Q3 2012, 19 industrial transactions closed with a total volume of $253,446,252. The 19 buildings totaled 1,838,672 square feet and the average price per square foot was $137.84.
  • Capitalization rates are lower in 2012, now averaging 6.64% compared to the same time last year where they averaged 7.44%.

 

Regional Market Info – North Bay Area

 

Retail

  • The vacancy rate has decreased slightly from 4.1% in Q3 2012, to 4.0% in Q4 2012.
  • The average quoted asking rental rates have decreased from $1.63/sf/m in Q3 2012, to $1.54/sf/m (NNN) in Q4 2012.
  • For buildings over 15,000 sf, in Q3 2012, 3 retail transactions closed with a total volume of $8,389,250. The 3 buildings totaled 72,539 square feet and the average price per square foot was $115.65.
  • Capitalization rates are higher in 2012, averaging 9.37% compared to 2011 at this time when they averaged 6.62%.

 

Office

  • The vacancy rate decreased from 12.5% in Q3 2012 to 12.2% in Q4 2012.
  • The average quoted asking rental rates have remained unchanged at $1.97/sf/m.
  • In Q3 2012, 2 office transactions closed with a total volume of $9,430,000. The 2 buildings totaled 66,639 square feet and the average price per square foot was $141.51.
  • Capitalization rates were slightly lower in 2012, averaging 7.79% compared to the same time in 2011 when they averaged 8.02%.

 

Industrial

  • The vacancy rate decreased slightly from 7.5% in Q3 2012, to 7.2% in Q4 2012.
  • The average quoted asking rental rates have decreased slightly from $.82/sf/m in Q3 2012, to $.81/sf/m in Q4 2012.
  • For buildings over 15,000 sf, in Q3 2012, 5 industrial transactions closed with a total volume of $14,850,000. The 5 buildings totaled 250,992 square feet and the average price per square foot was $59.17.
  • Capitalization rates were slightly lower in 2012, averaging 7.91% compared to the first six months of last year when they averaged 8.00%

As usual, it’s a pretty big difference if we just drive a couple of hours to one market or another.  It’s no secret that Sacramento is one of the hardest hit areas in California, while the South Bay is one of the best performing markets in the nation.  Please remember, these quick bullet points tell nowhere near the whole story.  For example, CoStar’s reports on just one of these 9 segments can encompass over 30 pages of information and explanations.

If you would like more detailed information on the market segment your property is in, we’d be happy to go over any of these data points in much greater detail.

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