The 122-million-square-foot Oakland-East Bay warehouse/ distribution market picked up in the second quarter, as 402,000 square feet of positive net absorption pushed the vacancy rate down 30 basis points to 12.1%. That is below the U.S. average of 12.7% and down 40 basis points from a year earlier. Reis had forecasted 601,000 square feet of net absorption for all of 2012, but that much had been achieved by July when the rate fell to 12.0%. Reis predicts consistently positive demand along with a revival of new supply, as the vacancy rate stays between 11.0% and 12.0% through 2016.
Rents have risen for two quarters, as in the second quarter of 2012 the average asking rent rose 0.4% to $5.01 psf and the average effective rent increased 0.7% to $4.47 psf. The effective average added 0.2% in July, and Reis predicts increases of 1.4% asking and 2.0% effective for all of 2012, with larger gains of up to 4.6% forecast to follow.
The 25.1-million-square-foot Flex/R&D market had a mixed second quarter. The vacancy rate was unchanged at 18.4%, as 64,000 square feet of net absorption was offset by the completion of the 64,000-square-foot Clorox Building 6 in Pleasanton. The 72,400-square-foot Pacific Corporate Center Building 8 remains under construction in Livermore. Both the average asking rent and the average effective rent were unchanged at $8.81 psf and $7.63 psf, respectively. In July, however, the vacancy rate fell 30 basis points and the effective average increased 0.3%. Reis predicts the vacancy rate will end 2012 at 18.4%, and stay close to that level for two additional years as demand is approximately matched by new supply. Rents are forecast to rise for all of 2012, but by less than 1.0%. Gains of 4.0% to 5.0% are expected to begin in 2014.
Cassidy Turley reports a vacancy rate of 9.3% for warehouse space and 21.5% for Flex/R&D. Respective average asking rents are given as $4.68 psf and $10.44 psf. Activity was modest in both segments in the second quarter per this source.