By Jack Stubbs
The Oakland/East Bay industrial market – which spans the inner East Bay from Richmond to Union City – saw a competitive quarter at the end of 2022, with various market indicators suggesting active times ahead, a recent report from CBRE showed.
According to the report, titled Q4 2022 Oakland Industrial Figures, the overall vacancy rate was down quarter-over-quarter from 2.8 percent to 2.6 percent. In addition, the quarter recorded positive net absorption of 400,500 square feet quarter-over-quarter, and 2.1 million square feet of industrial product remains under construction.
In terms of more general trends, the Oakland industrial market experienced a significant supply/demand imbalance, one that favored owners in 2022, notes the report, which also details how strong leasing activity – and a flight to quality inventory – resulted in higher asking rates
throughout the year as a whole. The fourth quarter mirrored this trend, as available space that came online was absorbed extremely quickly.
As noted, leasing activity was robust throughout the quarter, with tenants increasingly targeting Class A product over Class B and C assets. Some of the notable new leases included Moxion Power’s signing of a new 200,000 square foot lease in a build-to-suit project – which has not yet broken ground – and another 126,000 square foot lease of existing space at Ford Point in Richmond, also by Moxion Power. Other significant leases included RK Logistics Group’s 237,400 square foot sublease in Hayward; and Roadone IntermodaLogistics’ signing of a new 232,881 square foot lease in Oakland.
In early December, Lansum International inked a 155,000 square foot lease for an industrial warehouse located at 8380 Pardee Drive in Oakland, as The Registry reported. Bob Ferraro and Michael Barry of CBRE’s Industrial and Logistics team in Oakland, along with Kurt Mrazik from CBRE’s Pittsburgh office, represented the sub-landlord and Colliers represented the sub-tenant in the transaction, which reflected increasing interest in high-quality assets in Oakland’s industrial market relative to recent years prior.
“We’ve been experiencing record high activity in the Oakland/East Bay industrial market the last two years. Macroeconomic conditions have slowed activity slightly, but we are still experiencing activity above pre-pandemic levels. Class A space of this size is hard to find in the East Bay and with 1.5 million square feet. of new product expected to deliver next year, several tenants have pre-leased space as availability remains below 5 percent,” said Bob Ferraro, executive vice president at CBRE, at the time of the lease.
At the close of the year, demand for industrial inventory was robust, with a total of 45 companies actively touring for over 6 million square feet of space. While this figure represents a drop-off from the 67 tenants who were touring for 9.4 million square feet of space in the third quarter, overall demand remains strong, with over half of the fourth quarter requirements coming from out-of-market tenants.
In terms of sales activity, volume flattened by the end-of-year – which represented a continuation of the trend seen in the third quarter – due to a broader circumstance, notes the report. The flattening of sales volume is directly correlated to the substantial interest rate hikes implemented by the Federal Reserve Bank in 2022, which saw an increase from 0 percent to 0.25 percent at the beginning of the year to 4.25 percent to 4.5 percent by the end of the year, a trajectory not witnessed since 2007.
However, some transactions were recorded in the fourth quarter. Earlier in the quarter, Prologis completed its acquisition of Duke Realty Corporation – in an all-stock transaction valued at roughly $26 million – totaling just over 2 million square feet of industrial properties in the Oakland/East Bay market.
In terms of inventory in the pipeline, prospects for the Oakland/East Bay industrial market look promising, given recent and imminent deliveries. Prologis’ 58,530 square foot warehouse project at 6345 Coliseum Way – which broke ground in 2021 and was pre-leased to TireHub – was completed in the fourth quarter. Meanwhile, the Hayward Exchange@92 project, totaling 352,095 square feet and located at 25810-25830 Clawiter Road in Hayward, is expected to be delivered by third quarter 2023.
Throughout the coming year, there is another 1.7 million square feet of industrial space expected to deliver, with 1 million square feet having already been preleased.