MARIN
The Marin County office vacancy rate dropped 1% from the end of 2004 to the current rate of 14.4%. Class A properties reported a vacancy rate of 18.3%, up from 16.6% at the end of 2005. This increase is a result of the major blocks of space vacated by large tenants such as Fair Isaacs and Lucas Arts. With a vacancy rate of 7.5%, Class B properties experienced a 6% vacancy rate decline from the end of last year.
Asking lease rates have increased from the end of 2005 in nearly all Marin submarkets. Upward pressure on asking lease rates is expected to continue throughout 2007.
Southern Marin
The Southern Marin submarket continues to experience high levels of tenant activity, and the vacancy rate now stands at 4.5%, a 2.5% decrease from the end of 2005. The Class A market reported a vacancy rate of 5.4%, down from 9% at the end of 2005, and over 18,000 square feet of positive absorption. High profile Class A buildings have drawn heavy tenant interest in the past year. Significant leases occurred at 1 & 2 Belvedere where Redwood Trust expanded by 21,000 square feet and Merrill Lynch signed an 11,000-square-foot lease. The Class B market reported a 1% vacancy rate decline from the end of 2005. Most leases signed in class B properties were for spaces smaller than 5,000 square feet.
Central Marin
For most of 2006, Central Marin office properties reported the lowest vacancy rate in the county. The current rate of 4.9% represents a 2% decline from the fourth quarter 2005, and more than 28,000 square feet of positive absorption was reported. The Class A market remains very strong with a vacancy rate of 5.4%, a 3.5% drop from the end of 2005. Class A properties, such as Drake’s Landing and 125 East Sir Francis Drake Blvd., have experienced high levels of tenant demand and very little space remains available. The Class B market also reports a low vacancy rate of 3.9%, a 1.5% decline from the end of 2005. Primarily consisting of smaller spaces, Class B properties report high levels of demand from users requiring less than 2,000 square feet of operating space.
San Rafael
The Central San Rafael submarket reported more than 55,000 square feet of positive absorption from the end of 2005. The current vacancy rate of 10.2% represents an 8% vacancy rate decline from the end of last year. In 2006, several lease deals were completed at Class A properties, including nearly 20,000 square feet of leases signed at San Rafael Corporate Center. This has resulted in nearly 40,000 square feet of positive absorption in the Class A submarket and, with a vacancy rate of 16.2%, a 9% vacancy rate decline from the end of last year. Asking rates for Class A space have topped $3 per square foot on a full service basis for some high-identity properties. The Class B submarket reports a vacancy rate of 4.8%, nearly 9% lower than at the end of 2005.
The North San Rafael submarket reported a vacancy rate of 22.5%, nearly a 6% increase from the end of last year. This comes as a result of Fair Isaac leaving 70,000 square feet at 100 Smith Ranch Road and Take 2 Interactive moving from 50,000 square feet at 1 Thorndale into Hamilton Landing in Novato. The Class A market, with a vacancy rate of 31.3%, has still experienced high levels of tenant interest, highlighted by a lease signed by Restoration Hardware for 30,000 of the 70,000 newly vacant square footage vacated by Fair Isaac. The Class B submarket vacancy rate of 4.7% marks a 6% decline from the end of 2005 and was the result of several lease deals smaller than 5,000 square feet.
Novato
The Novato submarket experienced a 6% decline in vacancy from the end of 2005, and currently reports a rate of 16.6%. The Class A submarket reported nearly 50,000 square feet of positive absorption and a vacancy rate of 16.3%, a 4% decline from last year. Several significant leases were signed including the occupancy of entire 65,000 square foot hangar at Hamilton Landing by Take 2 Interactive. The Class B submarket reported a 10% vacancy rate decline from the fourth quarter 2005, and the current vacancy rate stands at 17.4%. The Bio-Marin expansion, into 85,000 square feet at 300 Bel Marin Keys Blvd., accounts for this major decline in vacancy.
Office Space
The Marin office market reported its lowest countywide vacancy rate in the past five years, with the countywide vacancy rate now below 15%. There has been a marked increase in tenant demand, especially in Class A properties. Even with 116,000 square feet of new inventory, set to enter the market at 2350-2370 Kerner Blvd. in mid-2007, vacancy rates are expected to continue their decline throughout the next year.
