Just this week Uber announced it was taking 330,000 sqft in Oakland (see the article here). Even though our clients have relatively small space(s) in a different market we think this is an indicator that office demand in in the North 680 market will improve right away. Last quarter was “slack” for the Walnut Creek B segment (rents and vacancy both went up) today we are seeing dramatic changes with the quotes we are receiving from the other brokers in the market.
We have the following perspective:
• All Class A buildings in Downtown Walnut Creek are over $3.10 per sf and rising. We are expecting the Class A segment to jump 10% or more in the next few weeks. Remember asking rents are just that. Transaction rates are either much lower or have concessions to offset the higher contract rates.
• The Class A/B spread downtown Walnut Creek is now over $1.00. We this is the equilibrium price where Class A tenants will start looking for value in the Class B buildings, Pleasant Hill, Concord, and Shadelands. And the spread is going to grow.
• Most rents in Concord A segment passed the $2.00 benchmark in September and we are expecting those rents to rise again. Traditionally Concord and Shadelands have traded tenants and in the last market bottom tenants were fleeing from Shadelands to class A buildings in Concord. We are predicting they will come back.
What Landlords can do to be ready:
• Continue with the market ready spaces and fix up to the property.
• Hold rates firm for the next 30 days then revisit asking rents again.
• Be on the lookout for the best long term transaction (5-10 years) that will last into the next market down cycle which we think could be 12-18 months.
