Despite vacancy rates above market equilibrium, overall asking rents continued to climb higher in the 4th quarter driven by demand in BART-centric submarkets. That said, small and medium-sized tenants are finding Class B alternatives with softer asking rents, higher tenant improvement allowances and free rent concessions.
- The East Bay Office market vacancy rate increased in Q4 2017 to 12.03% (up from 10.94% in Q3 2017). The smaller submarkets of Danville/Alamo (4.01%) and Lamorinda (8.66%) continue to be the tightest markets. Walnut Creek Shadelands (19.16%) and Dublin (18.06%) are the submarkets with the highest vacancy.
- Direct asking rental rates continued climbing upward for Class A in Q4 2017 at $37.39/rsf (up from $34.62 in Q3 2017) and Class B at $30.68/rsf (up from $29.94). Tenants fleeing San Francisco and Oakland continue to drive rents in the BART-centric submarkets. Class A asking rents were highest in Walnut Creek Downtown/BART ($47.24/rsf) and Lamorinda had the only Class B rents in the $40s at $40.19/rsf.
- Tenants seeking value are finding quality Class B space and lower asking rents in San Ramon ($27.12) and Concord ($25.77).