Prelease Trending Up
Vacancy rate across all product types took a minor dip from 4.3 to 4.2 percent. The average office asking rate fell from $5.95 to $5.88 per square foot. However, the lease rates for research and development (R&D) and industrial product rose with the industrial average asking rate of $1.87 NNN seeing the strongest rise quarter-over-quarter. Office net absorption is at negative 438,446 square feet, up from negative 444,698 square feet last quarter. San Mateo continues to lead the submarkets on the San Francisco Peninsula in net absorption finishing the quarter at 69,855 square feet. Contending for second is Burlingame with 38,468 square feet, then Redwood City with 37,544 square feet of net absorption.
While the R&D sector has the least amount of total inventory with 18,820,357 square feet, there are still 2.5 million square feet of developments in the pipeline. The dominant life science core has historically been in the northern end of San Mateo County with Gateway of the Pacific, The Cove at Oyster Point and Oyster Point projects all seeing large users preleasing sizeable blocks of space. However, new projects are moving southward of South San Francisco’s “Birthplace of Biotechnology” with San Carlos and Menlo Park life science projects seeing preleasing activity as well. The preleasing of new construction will continue to trend upwards as it provides the tenant with a well-situated location as well as the opportunity to expand or sublease space in the future for a premium.
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