North Bay Overview 2012

The last quarter U.S. GNP has been revised upwards to 2.8%, not great but better than the 2% GNP growth rates of the previous two quarters. Are we pulling out or falling back? We still have not had the kick up in employment which signals that new job growth has brought in new entrants to the market. However, the Palo Alto-Santa Clara job market has reported one of the best in the country and South of Market is exploding with new major leases with leasing rates rising 46% in one year.

While the national investment market for office buildings at the institutional level increased by 37% last year, the private capital investment has not rebounded the same. What we have is a bifurcated market, one for institutional investments and one for private capital.
So what is our forecast for commercial leasing and sales for the North Bay in 2012? I’d say more of the same spotty market conditions. We have had new corporate start-ups in 2011 so leasing of “A” space has been good but the real economic bellwether-leasing of “B” space is just beginning.

Local commercial lenders are back in the market with loans in the 5% and 6% interest rate region with increasing leasing and bottom of the trough pricing, real estate investments are a good choice today.

Compared to the paltry returns for fixed and debt instruments and the risks of the stock market, commercial real estate is the best investment choice for many.
While companies and owners looking for a long term home for their business snapped up the bargains available through institutional and lender wholesales of property, investors are only beginning to take advantage of leased up buildings and the lowest loan constants in 40 years.

We also believe that the Main street businesses will gradually come back, tired of waiting on the sidelines to see what’s happening to the economy and will increasingly expand, consolidate, move and add new locations.

While some economists are predicting that the next quarter is at risk of not rising at 2.8% GNP growth, others see positive signs on the horizon.

We feel the latter will happen in the North Bay. The favored industries that are projected for job growth are all located here: healthcare, tech, medical devices, telecom and alternative energy.

The expansion pressure of the South Bay tech companies and the exploding San Francisco social networking companies will continue to keep real estate values and growth in the North Bay on an upward slope.

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