2012 Global Market report - NAI Global

Oakland, California
Orange County, California
Contact
NAI Kilpatrick
+1 510 336 4715
Metropolitan Area
Economic Overview
2011
Population
2016 Estimated
Population
Employment
Population
Household
Average Income
Median
Household Income
Total Population
Median Age
1,534,442
1,631,103
811,853
$94,711
$70,970
36
The overall mood is one of cautious optimism. Economists
agree that there will be a slow, lumbering growth in the East
Bay. Positive indicators did come in September as industrial
production paired with consumer prices reflected by gains
in energy, food and housing. Recent employment growth
has placed fears of a double dip recession aside, with core
growth related to increased business activity.
The East Bay industrial market reported a total vacancy
decrease of 100 basis points to 10.6% from a year ago,
but increased slightly from the past quarter. Overall net
absorption remained negative at just under a million SF,
primarily focused in the I-880 corridor manufacturing
market. Although not reflective of any other segments of the
market, the primary cause of the major hemorrhage has
gained national attention; solar giant Solyndra’s bankruptcy
created an immediate availability of over 1.3 million SF and
accounted for roughly 80% of year-to-date negative net
absorption.
Office market conditions in the East Bay continue to mirror
the current economic conditions. Driven by professional
services and technology, a number of tenants have been
relocating to East Bay markets from San Francisco in search
of lower cost options. Activity has been focused primarily in
downtown Oakland and in the suburbs as larger corporate
users look to secure space in light of future hiring. Increased
leasing activity paints a positive picture for the future, but
growth has not reach levels to significantly impact market
fundamentals.
The East Bay multifamily market has continued to perform
well. Rising payrolls have contributed to healthy absorption,
decreased vacancy rates and rent growth to near prerecession
levels. A steady increase in transaction velocity
has been focused at either end of the pricing spectrum.
Private investment groups are targeting top-tier assets,
while smaller local investors have focused primarily on
distressed assets. Minimal new apartment construction is
underway, but as market conditions continue to improve the
development pipeline will grow.
Contact
NAI Capital (Orange County)
+1 949 854 6600
Metropolitan Area
Economic Overview
2011
Population
2016 Estimated
Population
Employment
Population
Household
Average Income
Median
Household Income
Total Population
Median Age
3,023,473
3,082,395
1,587,502
$103,233
$76,585
35
Orange County’s economy is predominately service oriented.
If we divide Orange County employment between industries
that produce goods and those that provide services, we find
that only 16.2% of all jobs in Orange County are in industries
that produce goods. The three largest sectors in Orange
County as measured by employment are professional and
business services, trade, transportation and utilities and
leisure and hospitality. Each of these industries fall in the
service sector.
The unemployment rate in Orange County remains stubbornly
high. As of September 2011 the rate was 8.6%.
This is below the peak of 10% but well above the 5.4%
average. In recent months, the unemployment rate has
fluctuated between 8.6% and 9.5%. While the September
data is at the lower boundaries, this is still too high to create
a robust economic recovery. We expect economic conditions
in Orange County to gradually improve over the next year.
High unemployment has significantly impacted the office
market in Orange County. Vacancy rates for Class A and
Class B office space remain elevated while lease rates
remain low. Excess supply and little demand for office space
are the driving factors that have limited new construction.
We estimate that only 400,000 SF of new space came
on-line during the first nine months of 2011. A lack of
financing is also to blame. However, even if financing were
available, it is not apparent that more office space would be
needed.
The industrial and retail markets have fared somewhat
better. Vacancy rates in the industrial market are below 7%.
In the retail market vacancy rates are between 2.3% and
7.1%. The 2.3% vacancy rate for malls is rather impressive
given the lack of consumer spending. We attribute these low
rates to the excellent retail properties located in Orange
County. Examples include South Coast Plaza Mall, the Irvine
Spectrum and the Newport Center.
Orange County’s multifamily market continues to perform
well. A high foreclosure rate, tight credit market and a weak
labor market have encouraged consumers to rent rather
than purchase at this time.
Oakland At A Glance
(Rent/SF/YR) low High effective avg. Vacancy
doWntoWn offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
doWntoWn offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
IndustrIal
$
$
$
$
N/A
26.28
18.25
N/A
25.32
17.60
$
$
$
$
N/A
35.61
23.68
N/A
29.52
26.43
N/A
$ 27.96
$ 21.55
N/A
$ 26.08
$ 20.12
N/A
9.20%
15.10%
N/A
15.40%
14.60%
Bulk Warehouse
Manufacturing
High Tech/R&D
retaIl
Downtown
Neighborhood Service Centers
Community Power Center
Regional Malls
$
$
$
4.87
5.26
8.42
N/A
N/A
N/A
N/A
$
$
$
10.03
9.35
15.30
N/A
N/A
N/A
N/A
$
$
$
5.28
6.60
9.00
N/A
N/A
N/A
N/A
8.10%
12.00%
24.10%
N/A
N/A
N/A
N/A
deVeloPment land Low/Acre High/Acre
Office in CBD
Land in Office Parks
Land in Industrial Parks
Office/Industrial Land - Non-park
Retail/Commercial Land
Residential
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Orange County At A Glance
(Rent/SF/YR) low High effective avg. Vacancy
doWntoWn offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
suburban offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
IndustrIal
Bulk Warehouse
Manufacturing
High Tech/R&D
retaIl
Downtown
Neighborhood Service Centers
Community Power Center
Regional Malls
$
$
$
$
$
$
$
$
$
N/A
N/A
N/A
25.75
11.76
6.00
2.40
3.48
2.40
N/A
9.00
12.00
33.00
$
$
$
$
$
$
$
$
$
N/A
N/A
N/A
34.80
54.07
68.82
15.00
13.80
15.00
N/A
60.00
51.00
45.00
$
$
$
$
$
$
$
$
$
N/A
N/A
N/A
28.18
25.62
21.32
6.42
6.44
6.46
N/A
23.45
22.47
41.06
N/A
N/A
N/A
45.50%
19.00%
14.80%
6.90%
6.90%
6.40%
N/A
7.10%
6.90%
2.30%
deVeloPment land Low/Acre High/Acre
Office in CBD
Land in Office Parks
Land in Industrial Parks
Office/Industrial Land - Non-park
Retail/Commercial Land
Residential
N/A
$ 995,520.00
$ 664,294.00
N/A
$ 625,000.00
N/A
N/A
$ 1,126,761.00
$ 1,593,750.00
N/A
$ 1,000,000.00
N/A
2012 Global Market Report n www.naiglobal.com
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