Metro Volume and Pricing
The shortage of retail space in the San Francisco market has suppressed leasing, but it seems to have had the opposite effect on qualifying single-property investment sales.* In the second quarter of 2012 there were twelve deals for $227.8 million, the highest dollar value for a quarter since the first quarter of 2007. The mean price was $516 psf, the most since the third quarter of 2006. The big deals were in the City of San Francisco, where Macy’s purchased its 104,900-square-foot building from Wells Fargo for $115 million ($1,097 psf) in April. In June, a 210,000-square-foot Market Street property traded for $90 million ($429 psf) with Commonfund Realty and Hudson Pacific Properties as seller and buyer.
San Francisco County, outside Reis shopping center submarket boundaries, is where the retail action has been over the past twelve months. It leads the three-county market in square footage sold, dollar value sold, and mean price. Eight of the ten largest deals of the past year have been in the city.
Cap Rate Comparisons and Forecasts
The mean cap rate for second quarter sales was 8.3%, far above the 4.1% rate recorded for the first quarter but typical of the high cap rates recorded the past few years. The rolling 12 month mean cap rate increased 40 basis points to 8.1%, and has been between 7.4% and 8.6% since the start of 2010. Reis predicts the rolling 12 month mean will end 2012 at 7.8%, and stay within 20 basis points of 8.0% through 2016.