Empowering Landlords and Businesses Across Silicon Valley

The East Bay industrial market—anchored by the 880 Industrial Corridor of stretching from the north in Richmond, south through Oakland, Hayward, Fremont, and Newark —experienced a summer slowdown in Q3 2024. While vacancy rates continued to climb, rental rates held steady, and the investment sales market remains strong due to limited available inventory.

For owners of industrial properties in Fremont, Hayward, Newark and the broader Bay Area and Silicon Valley gateway, here’s what you need to know.

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Vacancy & Absorption

• Vacancy increased to 7.2%, up from 6.8% in Q2 and 5.0% a year ago
• Net absorption for the past 12 months was negative 4.08 million SF, showing weaker tenant demand and more space returning to the market
• Despite rising vacancy, the slowdown is partly seasonal and influenced by the 2024 election year.

Owner takeaway: Tenants are taking longer to commit, and landlords should be prepared for extended marketing timelines and potentially higher concessions.

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Rental Rates

• Average asking rents remained steady at $1.46/SF NNN, only a modest increase from $1.41/SF a year earlier
• Steady rents suggest that while leasing activity has slowed, owners can still capture strong rent levels for functional, well-located properties.

Owner takeaway: Focus on tenant retention and flexibility in lease structuring. Rents are holding, but offering the right incentives will help maintain occupancy.

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Sales & Investment Market

• Industrial sales remain competitive with average sale prices at $271/SF, consistent with Q3 2023
• Cap rates are stable at 5.7%, reflecting investor confidence despite higher borrowing costs
• Notable transactions included:
  • 47020 Kato Road, Fremont (209,916 SF) sold for $79.5M ($379/SF).
  • 2376 Davis Avenue, Hayward (132,759 SF) sold for $34.7M ($261/SF).
  • 38875 Cherry Street, Newark (97,672 SF) sold for $31.5M ($323/SF)2024-Q3-East-Bay-CA-Industrial.

Owner takeaway: Institutional investors remain active, and pricing has held firm. If you’re considering selling, market fundamentals remain favorable.

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Leasing Activity

• Significant leases signed in Q3 included:
  • 127,452 SF in Fremont (6600 Stevenson Blvd) leased to Quanta Computer.
  • 70,171 SF in Fremont (44051 Osgood Road) leased to Amazon.
  • 68,662 SF in San Leandro (2062 W. Winton Ave) leased to DHX (3PL provider)2024-Q3-East-Bay-CA-Industrial.

Owner takeaway: Demand remains strong for tech, e-commerce, and 3PL tenants, especially for newer, functional spaces along I-880.

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Outlook for Owners

Despite a slowdown in leasing, the East Bay industrial market remains resilient and highly desirable for investors. Vacancy is elevated, but rents are holding, and investment sales are still closing at strong prices.

For Bay Area industrial property owners, the focus in the near term should be:

• Tenant retention strategies to keep occupancy steady.
• Flexibility in deal-making to compete with rising vacancy.
• Exploring sales opportunities, as pricing has not significantly corrected despite higher vacancies.

Market Insight courtesy of Chris Schofield, SIOR, Managing Principal – Lee & Associates Oakland