Middle Market Digest: This Week in the North West

This week in the North West region, a lot is happening in the Bay Area. Thin Film Electronics ASA will relocate its current US headquarters and NFC Innovation Center to Silicon Valley, CA in the first quarter of 2017. In addition, Exeter Property Group purchased a nearby Newark, CA asset free and clear of existing debt. We also learned that Zillow—which recently revealed a new platform design in the past week—forecasts rent appreciation of more than 4% for San Francisco and San Jose. Stay tuned for the stories you might have missed.—Natalie Dolce

BY THE NUMBERS

SAN JOSE, CA—A recent multifamily report for the San Jose Metro Area from Marcus & Millichap shows that home to sever­al of the largest corporations in the nation and a vibrant startup scene, the labor mar­ket in San Jose has been a beneficiary of continued hiring by multiple organizations of all sizes. As a result, demand for housing has soared, leading the vast majority of local residents toward rental housing due to the high cost of single-family homes. While new development was slow to catch up to plum­meting vacancy rates in previous years of the cycle, builders have increased the pace of deliveries significantly, with planned com­pletions set to reach the highest point since 2000, the report says.

SEATTLE—Rents in the West's tech job centers are predicted to be among some of the fastest growing across the nation over the next year, according to the latest Zillow Rent Forecast for August 2016 to August 2017, which predicts rent trends down to the zip-code level across the US. Rents in Seattle and Portland are expected to rise the most over the next 12 months—Zillow forecasts rent growth of more than 7% in Seattle and 6% in Portland. Denver, San Francisco and San Jose are forecasted to see rent appreciation of more than 4%. Only 11 of the 35 largest metros will see a slowdown in rents, the company says.

SILICON VALLEY, CA—According to a recent office report from JLL, in the Silicon Valley, leasing activity continues to push overall vacancy levels lower as tech tenants are still focused on newer space availabilities. Google, Cloudera, Ford, and AMD led the market with the largest deals this quarter, removing a combined total of 1.2 million square feet of available class A product. However, when compared to 2015, there have been fewer transactions greater than 150,000 square feet and occupancy gains this quarter were at the lowest levels since 2013. Including the aforementioned deals, there is still approximately 3 million square feet of large tenant move-ins that are expected to take place within the next 12 months. However, it raises the questions as to what market conditions will look like when large tenants like Google slow their appetite for space, the firm says.

NEWS & NOTABLES

KING COUNTY, WA—On the heels of its Series A news, Point, the first financial technology platform that allows homeowners to unlock their home equity wealth without taking on new debt, announced today the expansion of its coverage to its second state. Point is now investing in homes in three counties in western Washington: King County, Snohomish County and Pierce County.

SEATTLE—Zillow Group Inc. recently revealed the launch of “Premier Broker,” a new platform designed to help brokers with lead management and conversion. Premier Broker combines some of Zillow Group's most popular advertising products with new lead management capabilities. The platform is designed to streamline the lead acquisition and management process with new tools and services, including:

SILICON VALLEY, CA—Thin Film Electronics ASA has leased a former Qualcomm-owned manufacturing facility in Silicon Valley and will relocate its current US headquarters and NFC Innovation Center in the first quarter of 2017. The new location will house Thinfilm's new high-volume roll-to-roll manufacturing line. Roll-based production will increase Thinfilm's front-end production capacity to five billion NFC OpenSense and NFC SpeedTap tags per year – the equivalent of up to $680 million in annual revenue. Thinfilm intends to begin ordering line-related equipment immediately, according to a prepared statement. The building, located at 2581 Junction Ave. San Jose, CA, was formerly an operational display fab run by Qualcomm MEMS Technologies Inc., and was in production until the Spring of 2016. More than $80 million has been invested previously in the 93,000-square-foot facility, which sits on 5.4 acres and features a 22,000+ square foot, class 10-10,000 cleanroom.

DEAL TRACKER

NEWARK, CA—Holliday Fenoglio Fowler L.P. has closed the $21.6 million sale of 39700 and 39870 Eureka, two fully-leased, institutional-quality advanced manufacturing and R&D buildings totaling 149,089 square feet in the San Francisco Bay Area community of Newark, CA. HFF marketed the asset on behalf of the seller, Cohen Asset Management Inc. Exeter Property Group purchased the assets free and clear of existing debt. Located near the epicenter of the western US, the properties are in close proximity to Oakland International Airport, the Port of Oakland, Mineta San Jose International Airport and South Pacific Coast Railroad.  Situated on 12.01 acres in southeast Newark approximately 38 miles from downtown San Francisco, the properties are adjacent to several interstates, including 880, 580, 680, 80 and 5, providing direct access into San Francisco, Seattle, Los Angeles, Sacramento, Reno, Portland and Salt Lake City. Completed in 2001, 39700 and 39870 Eureka have received approximately $5.8 million in tenant-specific improvements and feature clear heights up to 20' and nine dock-high and five drive-in loading doors.  The buildings are leased on a triple net lease basis to a diverse tenant mix, including Resin Designs, LLC; Socket Mobile, Inc. and SMART Modular.

SEATTLE—Avanath Capital Management, an institutional fund manager that invests in affordable and workforce housing, has acquired a workforce housing asset called the Lodge at Peasley Canyon, a 339-unit property in Seattle, WA. Since 2008, Avanath has acquired and managed more than 41 affordable and workforce housing properties totaling over 7,000 units across the nation, targeting assets near major employment hubs in supply-constrained markets.

CITRUS HEIGHTS, CA—A net-leased Walgreens drugstore in Citrus Heights, CA, has changed hands. The $10.4-million sales price equates to more than $700 per square foot. The property is located at the hard corner of Greenback Lane and Sunrise Boulevard at 6199 Sunrise Boulevard in Citrus Heights. The site is an outparcel to Marketplace at Birdcage, a 337,725-square-foot regional shopping center. Sunrise Mall, a 1.1-million-square-foot regional shopping mall anchored by JC Penney, Sears, and Macy's is across the street. The location is part of a strong trade corridor surrounded by many national major retailers, including Toys R Us, Ulta Beauty, Marshalls, Sprouts, BevMo!, Big 5 Sporting Goods, Staples, and more.
BUILDING BLOCKS

SACRAMENTO—WoodSpring Hotels has entered into an agreement with local hotel developer Northgate Investment Group LLC, to develop a WoodSpring Suites in Sacramento near the Natomas area. The California-based developers will build a new prototype 123-unit WoodSpring Suites in Sacramento. The projected opening date is late 2017. The franchised location will mark the brand's second prototypical build in the state of California with multiple other sites in the pipeline. “WoodSpring is a great fit for us. Our focus is to develop, own and operate hotel assets in the greater Sacramento area,” says a partner at Northgate Investment Group LLC. “WoodSpring Hotels has a very simple, but precise, operating model that we like, and combined with WoodSpring's franchise support system and its above average NOI percentage, we felt this brand was the right choice for us.”

PORTLAND, OR—Swift Real Estate Partners has signed a long-term renewal and expansion with the Oregon Environmental Council at the Merchant Hotel building, a 60,515-square-foot office building in the heart of Portland's Old Town district. Located at 121 NW Second Avenue, the Merchant Hotel is a four-story creative office building with a unique story and identity. Originally built in 1880 as a first-class luxury hotel, the building featured one of the first hydraulic elevators in the city and is now listed on the US National Register of Historic Places. Acquired by Swift Real Estate Partners in 2015, the property is currently undergoing renovations that preserve the architectural integrity of the historic building while meeting the needs of today's technology and creative office tenants, according to a prepared release.

This week in the North West region, a lot is happening in the Bay Area. Thin Film Electronics ASA will relocate its current US headquarters and NFC Innovation Center to Silicon Valley, CA in the first quarter of 2017. In addition, Exeter Property Group purchased a nearby Newark, CA asset free and clear of existing debt. We also learned that Zillow—which recently revealed a new platform design in the past week—forecasts rent appreciation of more than 4% for San Francisco and San Jose. Stay tuned for the stories you might have missed.—Natalie Dolce

BY THE NUMBERS

SAN JOSE, CA—A recent multifamily report for the San Jose Metro Area from Marcus & Millichap shows that home to sever­al of the largest corporations in the nation and a vibrant startup scene, the labor mar­ket in San Jose has been a beneficiary of continued hiring by multiple organizations of all sizes. As a result, demand for housing has soared, leading the vast majority of local residents toward rental housing due to the high cost of single-family homes. While new development was slow to catch up to plum­meting vacancy rates in previous years of the cycle, builders have increased the pace of deliveries significantly, with planned com­pletions set to reach the highest point since 2000, the report says.

SEATTLE—Rents in the West's tech job centers are predicted to be among some of the fastest growing across the nation over the next year, according to the latest Zillow Rent Forecast for August 2016 to August 2017, which predicts rent trends down to the zip-code level across the US. Rents in Seattle and Portland are expected to rise the most over the next 12 months—Zillow forecasts rent growth of more than 7% in Seattle and 6% in Portland. Denver, San Francisco and San Jose are forecasted to see rent appreciation of more than 4%. Only 11 of the 35 largest metros will see a slowdown in rents, the company says.

SILICON VALLEY, CA—According to a recent office report from JLL, in the Silicon Valley, leasing activity continues to push overall vacancy levels lower as tech tenants are still focused on newer space availabilities. Google, Cloudera, Ford, and AMD led the market with the largest deals this quarter, removing a combined total of 1.2 million square feet of available class A product. However, when compared to 2015, there have been fewer transactions greater than 150,000 square feet and occupancy gains this quarter were at the lowest levels since 2013. Including the aforementioned deals, there is still approximately 3 million square feet of large tenant move-ins that are expected to take place within the next 12 months. However, it raises the questions as to what market conditions will look like when large tenants like Google slow their appetite for space, the firm says.

NEWS & NOTABLES

KING COUNTY, WA—On the heels of its Series A news, Point, the first financial technology platform that allows homeowners to unlock their home equity wealth without taking on new debt, announced today the expansion of its coverage to its second state. Point is now investing in homes in three counties in western Washington: King County, Snohomish County and Pierce County.

SEATTLE—Zillow Group Inc. recently revealed the launch of “Premier Broker,” a new platform designed to help brokers with lead management and conversion. Premier Broker combines some of Zillow Group's most popular advertising products with new lead management capabilities. The platform is designed to streamline the lead acquisition and management process with new tools and services, including:

SILICON VALLEY, CA—Thin Film Electronics ASA has leased a former Qualcomm-owned manufacturing facility in Silicon Valley and will relocate its current US headquarters and NFC Innovation Center in the first quarter of 2017. The new location will house Thinfilm's new high-volume roll-to-roll manufacturing line. Roll-based production will increase Thinfilm's front-end production capacity to five billion NFC OpenSense and NFC SpeedTap tags per year – the equivalent of up to $680 million in annual revenue. Thinfilm intends to begin ordering line-related equipment immediately, according to a prepared statement. The building, located at 2581 Junction Ave. San Jose, CA, was formerly an operational display fab run by Qualcomm MEMS Technologies Inc., and was in production until the Spring of 2016. More than $80 million has been invested previously in the 93,000-square-foot facility, which sits on 5.4 acres and features a 22,000+ square foot, class 10-10,000 cleanroom.

DEAL TRACKER

NEWARK, CA—Holliday Fenoglio Fowler L.P. has closed the $21.6 million sale of 39700 and 39870 Eureka, two fully-leased, institutional-quality advanced manufacturing and R&D buildings totaling 149,089 square feet in the San Francisco Bay Area community of Newark, CA. HFF marketed the asset on behalf of the seller, Cohen Asset Management Inc. Exeter Property Group purchased the assets free and clear of existing debt. Located near the epicenter of the western US, the properties are in close proximity to Oakland International Airport, the Port of Oakland, Mineta San Jose International Airport and South Pacific Coast Railroad.  Situated on 12.01 acres in southeast Newark approximately 38 miles from downtown San Francisco, the properties are adjacent to several interstates, including 880, 580, 680, 80 and 5, providing direct access into San Francisco, Seattle, Los Angeles, Sacramento, Reno, Portland and Salt Lake City. Completed in 2001, 39700 and 39870 Eureka have received approximately $5.8 million in tenant-specific improvements and feature clear heights up to 20' and nine dock-high and five drive-in loading doors.  The buildings are leased on a triple net lease basis to a diverse tenant mix, including Resin Designs, LLC; Socket Mobile, Inc. and SMART Modular.

SEATTLE—Avanath Capital Management, an institutional fund manager that invests in affordable and workforce housing, has acquired a workforce housing asset called the Lodge at Peasley Canyon, a 339-unit property in Seattle, WA. Since 2008, Avanath has acquired and managed more than 41 affordable and workforce housing properties totaling over 7,000 units across the nation, targeting assets near major employment hubs in supply-constrained markets.

CITRUS HEIGHTS, CA—A net-leased Walgreens drugstore in Citrus Heights, CA, has changed hands. The $10.4-million sales price equates to more than $700 per square foot. The property is located at the hard corner of Greenback Lane and Sunrise Boulevard at 6199 Sunrise Boulevard in Citrus Heights. The site is an outparcel to Marketplace at Birdcage, a 337,725-square-foot regional shopping center. Sunrise Mall, a 1.1-million-square-foot regional shopping mall anchored by JC Penney, Sears, and Macy's is across the street. The location is part of a strong trade corridor surrounded by many national major retailers, including Toys R Us, Ulta Beauty, Marshalls, Sprouts, BevMo!, Big 5 Sporting Goods, Staples, and more.
BUILDING BLOCKS

SACRAMENTO—WoodSpring Hotels has entered into an agreement with local hotel developer Northgate Investment Group LLC, to develop a WoodSpring Suites in Sacramento near the Natomas area. The California-based developers will build a new prototype 123-unit WoodSpring Suites in Sacramento. The projected opening date is late 2017. The franchised location will mark the brand's second prototypical build in the state of California with multiple other sites in the pipeline. “WoodSpring is a great fit for us. Our focus is to develop, own and operate hotel assets in the greater Sacramento area,” says a partner at Northgate Investment Group LLC. “WoodSpring Hotels has a very simple, but precise, operating model that we like, and combined with WoodSpring's franchise support system and its above average NOI percentage, we felt this brand was the right choice for us.”

PORTLAND, OR—Swift Real Estate Partners has signed a long-term renewal and expansion with the Oregon Environmental Council at the Merchant Hotel building, a 60,515-square-foot office building in the heart of Portland's Old Town district. Located at 121 NW Second Avenue, the Merchant Hotel is a four-story creative office building with a unique story and identity. Originally built in 1880 as a first-class luxury hotel, the building featured one of the first hydraulic elevators in the city and is now listed on the US National Register of Historic Places. Acquired by Swift Real Estate Partners in 2015, the property is currently undergoing renovations that preserve the architectural integrity of the historic building while meeting the needs of today's technology and creative office tenants, according to a prepared release.