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Q1 2017 / Investment Market Report San Francisco Bay Area Q1 Investment Facts 184 Total Sales $5.6B Total Sales Volume $397 Price Per SF (Ex. Multi-Family) 5.3 % Average Cap Rate Partnership. Performance. Investment Overview The San Francisco Bay Area investment market continued to stay active during the first three months of 2017 after a very active 2016. The Bay Area recorded nearly $5.6 billion in total sale volume during the quarter. San Francisco witnessed over $1.9 billion from 33 trades during the quarter, the highest sale volume of any region in the Bay Area. Silicon Valley was the most active region, recording 64 trades for over $1.8 billion. The office market in the Bay Area accounted for over half of the total sale volume during the quarter, over $3.0 billion in trades. The average price per square foot for office buildings during the quarter was $443, up 27% from the Q1 2016 average. A big reason for the dramatic increase was Facebook exercising their pre-agreed purchase option at their Menlo Park headquarters from RREEF during the first quarter of 2016. In 2011, Facebook signed a 10-year lease for their 1msf+ headquarters in Menlo Park with an option to buy the office complex after 5 years for $198/sf, a bargain in today’s market. San Francisco recorded the highest average price per square foot in the Bay Area for the 15th consecutive quarter with an average price per square foot of $675 during the first quarter. Blackstone recorded the largest office sale of the quarter, acquiring 211 Main Street in San Francisco’s North Financial district from CIM Commercial for $293 million or $702/sf. The sale closed a quarter after Charles Schwab renewed on a 10-year term for the entire building. The first quarter of 2017 was once again dominated by private, domestic-based investors in the Bay Area. Private investors accounted for 46% of all trades that took place during the quarter. Tech companies continued to be active acquiring office buildings during the first quarter. In San Mateo, Rakuten Marketing purchased 700-900 Concar Dr for $180M or $820/sf. Rakuten occupies roughly 60,000 sf in the fully-leased 220,000-sf building complex. Adobe exercised its option to purchase the 285,000-sf Almaden Tower office building in San Jose that they have occupied since 2003. The Bay Area multi-family market continues to stay red hot, recording over $800M in trades during the first quarter, with an average cap rate of 5.1%. Over 2,700 multi-family units were traded during the quarter, averaging $297,000 per unit. The Bay Area retail market recorded its highest quarterly sales volume on record, totaling $1.5B in trades during the first quarter of the year with an average cap rate of 4.8%. This was largely due to Regency Centers buying Equity One during the first quarter of the year. Bay Area industrial sales were slow during the first quarter, recording just under $300M in trades, down 73% from Q1 2016. Expect the investment market in the San Francisco Bay Area to stay active throughout the rest of 2017 due to strong demand as investors continue to steer away from the volatile global equity and commodity markets and invest in real estate where more stable returns are available. avisonyoung.com San Francisco Bay Area Q1 2017 / Quarterly Investment Market Report Investment Snapshot Investment activity is expected to slow down in 2017 compared to the past couple of years due to a gradual increase in interest rates throughout the year but the Bay Area continues to be very attractive location to investors in the U.S. and around the world. Total Deals Price Per SF (Exc. Multi-Family) Price Per Unit (Multi-Family) Total Sales Volume Cap Rate 184 $397 $297,176 $5,592,949,059 5.3% Sales Volume (By Investment Sector) 211 Main Street in San Francisco sold for ± $293 Million($702/sf ) during Q1 2017. 7% 7% 13% 13% 37% 26% 37% 26% 17% 17% Institutional Public Institutional Public Private Private $6.0 8.0% 8.0% $5.0 $5.0 7.0% 7.0% $4.0 $4.0 6.0% 6.0% $3.0 5.0% 5.0% $2.0 $2.0 4.0% 4.0% $1.0 $1.0 3.0% 3.0% $0.0 $0.0 $3.0 2014 2014 Office 2015 2015 Office Industrial Industrial Retail Partnership. Performance. 2016 2016 Retail Mul�-Family Mul�-Family 2017 Foreign Equity Fund Equity Fund User/Other User/Other Historical Cap Rate by Product Type $6.0 Billions Billions Historical Total Volume by Product Type Foreign 2017 2.0% 2.0% 2014 2014 2015 Office 2015 Office Industrial Industrial Retail 2016 2016 Retail Mul�-Family Mul�-Family 2017 2017 avisonyoung.com San Francisco Bay Area Q1 2017 / Quarterly Investment Market Report Investment Market By The Numbers PRICE/SF CAP RATE 14 8 16 3 29 70 13 3 1 2 12 31 10 2 7 7 12 38 37 13 24 12 53 139 $258,302,500 $75,474,000 $1,305,347,155 $219,012,500 $1,153,154,271 $3,011,290,426 $79,929,000 $27,219,500 $13,648,416 $5,675,000 $167,777,000 $294,248,916 $224,022,687 $145,762,822 $540,642,820 $500,231,292 $65,756,500 $1,476,416,121 $562,254,187 $248,456,322 $1,859,638,391 $724,918,792 $1,386,687,771 $4,781,955,463 1,493,060 444,578 1,933,124 351,066 2,575,976 6,797,804 531,269 379,770 30,766 16,460 1,096,911 2,055,176 663,171 729,910 511,857 1,078,407 201,086 3,184,431 2,687,500 1,554,258 2,475,747 1,445,933 3,873,973 12,037,411 $173 $170 $675 $624 $448 $443 $150 $72 $444 $345 $153 $143 $338 $200 $1,056 $464 $327 $464 $209 $160 $751 $501 $358 $397 7.4% 7.2% 4.8% 4.2% 6.1% 5.5% 6.2% 7.3% 6.2% 6.9% 5.4% 5.9% 4.7% 5.8% 3.2% 6.2% 5.5% 4.8% 6.2% 5.8% 4.3% 5.6% 6.0% 5.3% SALES DOLLAR VOLUME TOTAL UNITS PRICE/UNIT CAP RATE 16 6 9 3 11 45 $136,681,000 $122,157,500 $70,340,734 $33,705,000 $448,109,363 $810,993,596 721 391 152 78 1,387 2,729 $189,571 $312,423 $462,768 $432,115 $323,078 $297,176 5.6% 4.5% 4.3% 4.5% 5.4% 5.1% East Bay North Bay San Francisco San Mateo County Silicon Valley Bay Area Multi-Family DOLLAR VOLUME TOTAL SQUARE FEET *Sales over $2.5 million Price/SF Historical Price Per SF/Unit $400 $400,000 $350 $350,000 $300 $300,000 $250 $250,000 $200 $200,000 $150 $150,000 Price/Unit SALES East Bay North Bay San Francisco San Mateo County Silicon Valley Bay Area Office/Flex East Bay North Bay San Francisco San Mateo County Silicon Valley Bay Area Industrial East Bay North Bay San Francisco San Mateo County Silicon Valley Bay Area Retail East Bay North Bay San Francisco San Mateo County Silicon Valley Bay Area Total (Excluding Multi-Family) $100,000 $100 2010 2011 2012 2013 Price/SF (Excluding Multi-Family) Partnership. Performance. 2014 2015 2016 2017 Price/Unit (Multi-Family) avisonyoung.com San Francisco Bay Area Q1 2017 / Quarterly Investment Market Report Top Office/Flex Sales Property Name 211 Main St 410-430 N Mary Ave 100 Pine St 150 Spear St 700-900 Concar Dr City San Francisco Sunnyvale San Francisco San Francisco San Mateo Market San Francisco Silicon Valley San Francisco San Francisco San Mateo County Sq.Ft. 417,266 350,000 402,534 264,492 218,985 Sale Price $292,881,810 $290,700,000 $287,500,000 $185,000,000 $179,500,000 Price/SF $702 $831 $714 $699 $820 Buyer Blackstone Tristar Capital Rockpoint Group Walnut Hill Group Rakuten Marketing City San Jose Newark Fremont Fairfield Livermore Market Silicon Valley East Bay Silicon Valley North Bay East Bay Sq.Ft. 354,000 142,188 161,200 212,802 86,700 Sale Price $36,200,000 $34,875,000 $28,200,000 $17,500,000 $15,500,000 Price/SF $102 $245 $175 $82 $179 Buyer Vertical Ventures LLC Moulton Company LBA Realty Susan Lowenberg Rev. Trust Dedeaux Properties City Daly City San Francisco San Francisco San Rafael Concord Market San Mateo County San Francisco San Francisco North Bay East Bay Sq.Ft. 850,000 226,699 263,640 721,000 253,000 Sale Price $392,204,963 $265,067,820 $250,000,000 $141,932,822 $83,934,811 Price/SF $461 $1,169 $948 $197 $332 Buyer Regency Centers Regency Centers Morgan Stanley Merlone Geier Partners Regency Centers Units 409 274 286 226 189 Sale Price $132,454,652 $88,734,902 $83,500,000 $73,190,101 $71,620,100 Price/Unit $323,850 $323,850 $291,958 $323,850 $378,942 Top Industrial Sales Property Name 5215-5225 Hellyer Ave 39888 Eureka Dr 44901 Industrial Dr 2012 Courage Rd 7600 Patterson Pass Rd Top Retail Sales Property Name Serramonte Shopping Center* Potrero Center* 120 Stockton St Northgate Mall Willows Shopping Center* Top Multi-Family Sales Property Name Santa Palmia Apts* Palma Sorrento Apts* Verdant at Green Valley Villa Veneto* Village of Marineo* City San Jose San Jose Fairfield San Jose San Jose Market Silicon Valley Silicon Valley North Bay Silicon Valley Silicon Valley Buyer Essex Property Trust Essex Property Trust Abacus Capital Group Essex Property Trust Essex Property Trust *Allocated AY Investment Team Bay Area Capital Markets Group Property Management / Lease Administration Laef Barnes, Vice President 415.349.3391 Tom Greenfield, CPM® LEED®, Property Manager 510.534.4700 Mac Carlsen, Financial Analyst 415.349.3390 Bryce McEfee, LEED® AP, Property Manager 916.426.3584 Nadav Kariv, Senior Associate 415.349.3392 Tom McEfee, CPM®, SVP, Management Services 916.426.3570 Kevin Klink, Vice President 415.349.3393 Lloyd Bakan, Principal 650.425.6412 Project / Construction Management Jon Geary, Associate 650.425.6415 David Gonzales, Managing Director / Principal 415.322.5065 Todd Campbell, Vice President, Research 650.425.6412 Shannon Dupler, Manager, Financial Reporting 415.349.3399 Robert Yeagle, Market Analyst 415.322.5056 Clare Friel, Project Manager 415.349.3406 Nicole de la Rosa, Assistant Project Manager 510.254.4268 avisonyoung.com Avison Young - Northern California, Ltd. 601 California Street, 5th Floor San Francisco, CA 94108 T 415.322.5050 F 415.322.5055 Avison Young - Northern California, Ltd. 950 Tower Lane, Suite 120 Foster City, CA 94404 T 650.425.6413 F 650.425.6413 Avison Young - Northern California, Ltd. 1111 Broadway, Suite 1650 Oakland, CA 94607 T 510.254.4255 F 510.254.4256 © 2017 Avison Young [Avison Young - Northern California, Ltd.]. All rights reserved. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.