MR_PLS_17Q3_OFC_175x227New Construction Offers Hope to Larger Users

The Tri-Valley industrial market continues to be an owner's or landlord's market, given the overall scarcity of existing land and buildings to purchase or lease. Increasingly, tenants are recognizing that staying far ahead of their lease expiration dates is necessary and to their advantage, and increasingly, with the lack of options, tenants are forced to negotiate the best renewal deal they possibly can in a strong landlord market. The overall vacancy rate for light industrial and warehouse buildings in the Tri-Valley region continues its drop to a record low of 0.6 percent. At of the end of September 2017, there was a total of only 169,296 square feet of available industrial product to lease or purchase. Net absorption year-to-date was 133,265 square feet with the current quarter's positive absorption of 21,017 square feet. Given there is very little to purchase or lease, we expect rents and pricing will continue to rise going forward. Currently, there are six industrial projects under construction in the city of Livermore. All of these projects are high-cube, state-of-the-art distribution/manufacturing buildings that can accommodate one relatively large tenant (80,000-265,000 square feet), with little intention, currently, to demise the spaces. The weighted average asking rents overall for Tri-Valley industrial have remained at a high of $0.92 per square foot, NNN; however, average industrial rents range widely, from $0.78 per square foot, NNN, in Livermore, to $1.22 per square foot, NNN, in Pleasanton.