Economist: Bay Area Commercial Real Estate Poised for Strong Run
Submitted January 19, 2012, 12:33 AM
For those seeking insight into the world’s economic future, Kevin Thorpe has a suggestion: Watch copper prices and Italian bond yields.
As a raw material, copper has exposure to a broad swath of industries from construction to telecommunications. “It will be a leading indicator of underlying strength in the global economy,” the chief economist for commercial brokerage Cassidy Turley said.
“If [Italian] yields rise, it could be a precursor to a much deeper recession in Europe,” he said, and worried banks are not lending banks. Conversely, if yields fall, it could mean greater economic stability, rising U.S. bank confidence and a greater willingness to lend. That could benefit commercial real estate.
Thorpe, who previously oversaw research operations at the National Association of Realtors, was keynote speaker Jan. 17 for Cassidy Turley’s annual real estate conference, held this year at The Fairmont in San Francisco. The afternoon and early evening session drew 550 Cassidy Turley clients, brokers and other professionals. Besides Thorpe, the event included a panel with company partners overseeing its investment and multiple property divisions.
On a global basis, 2012 is likely to look much like 2011, Thorpe said. Northern California, including the San Jose, San Francisco, Oakland and Sacramento metro areas, added more than 53,000 jobs in the 12 months ending in November, led by steep growth in business and professional services, education and health care. In 2012, employment growth in the region will top out at 40,000 new jobs, the brokerage predicts. Oakland in the East Bay, which added only 3,000 jobs over the last year, is expected to see more than 9,000 new jobs in 2012.
Employment growth across the region then should surge ahead in 2013, 2014 and 2015, with nearly 80,000 new jobs in 2014 alone. Northern California lost nearly 250,000 jobs in 2008, 2009 and 2010.
Office occupancy gains in the Silicon Valley, San Francisco and San Mateo submarkets were among the top 10 strongest in the country last year, beaten only by New York, Seattle and the Texas powerhouses, Houston and Dallas. Office rents rose 17 percent in San Mateo County and 16 percent in San Francisco, according to Cassidy Turley research.
Over the next 24 months, San Francisco, San Mateo and Santa Clara counties will see 8.1 million square feet in office development, including 2.9 million square feet of speculative development and 4.4 million square feet that companies are building for their own account, the brokerage said. The new 3.1 million square-foot Apple Inc. campus in Cupertino is expected to cost $1,350 a square foot, said partner Erik Hallgrimson.
