Prepared by Todd Campbell, Vice President, Research
As of May this year, San Mateo County boasts the second lowest unemployment rate in California at 4.1%. Year-over-year, employment grew by nearly 7,000 jobs in San Mateo County. Although not all San Mateo County residents work within the county, the positive employment figures helped increase occupancy by almost 130,000 SF in this market during that time period.
The San Mateo County office market ended the second quarter of the year with a 9.9% vacancy rate, down 50 basis points from the first quarter. North San Mateo County, which has struggled to attract tenants the past couple of years was the biggest winner in the second quarter, recording 108,000 SF of occupancy growth. With an average asking rate of $2.85 psf full service and the highest vacancy rate in the county at 15.6%, north county continues to be the most discounted submarket in the county. Central county recorded 63,000 SF of occupancy growth over the last three months, ending the second quarter with a vacancy rate of 9.5% and an average asking rate of $3.77 psf full service. The counties highest average asking rates continue to be in southern San Mateo County, where asking rates are averaging $4.45 psf full service. With vacancy ending the quarter at 6.2% in southern county and minimal large blocks of space available, look for growing and well established companies to venture north into central and northern San Mateo County throughout the next 24 months.
Over the past few years, growing tech giants like Google and Apple have purchased sites in anticipation of future growth in Silicon Valley. Facebook is the next big tech giant to continue this trend, but in San Mateo County. They have agreed to purchase a 59 acre campus adjacent to their 430,000 SF Facebook West site that is currently under construction in East Menlo Park from TE connectivity. Facebook will reportedly lease the campus back to the seller for an undisclosed amount of years. This is a move that will secure future growth around their existing million square foot campus in Menlo Park.
Investors are active again in San Mateo County. The county recorded over $500 million in sales volume during the second quarter of 2014 for the first time since 2007. Nine deals closed for over $5 million during the quarter at an average of $402 per square foot. The largest investment deal of the quarter was Clearview Business Park in San Mateo; this fully leased 270,000 SF business park sold for a reported $126 million ($465 psf ). With asking rates continuing to rise in San Mateo County, expect investors to stay active throughout the rest of 2014.