Challenges are Manageable Due to Innovation

SAN FRANCISCO—There are many megatrends at play shaping the future of the Bay Area's economy and commercial real estate markets. A BenchMarks event by Newmark Grubb Knight Frank was recently held to examine these trends and offer some insight into the future of the Bay Area market.

Capital markets activity nationally and locally remains solid, though some softening is occurring consistent with property performance, says Alexander Paul, managing director of national market research, NGKF. The capital markets outlook indicates that sales volume in the Bay Area for office and apartments will be below 2016 levels but sturdy during the mature phase of the cycle. Paul says pricing is expected to edge down and cap rates will likely edge up in the period ahead.

The Bay Area's extraordinary recent market performance reflects the region's many strengths, however, that level of success could never be sustained, Paul says. A softer landing is expected more so than in prior cycles due to the presence of ubiquitous technology and the Bay Area's status as the global technology capital.

The region's traffic and high housing prices are hurdles, but economic growth driven by innovation will help the region overcome those challenges, experts said at the Benchmarks event. In addition, collaboration, flexibility and productivity will drive demand for office space and apartment units, though demand is tapering.

“The Bay Area commercial real estate market is facing a number of challenges in the period ahead, including decelerating job growth, and constraints on office and apartment rent growth,” Paul tells GlobeSt.com. “And yet, the region remains a top choice for investors foreign and domestic, as well as a source of remarkable innovation that will drive long-term demand for office space and residential units. Disciplined and thoughtful investors will have numerous opportunities of which to take advantage.”

SAN FRANCISCO—There are many megatrends at play shaping the future of the Bay Area's economy and commercial real estate markets. A BenchMarks event by Newmark Grubb Knight Frank was recently held to examine these trends and offer some insight into the future of the Bay Area market.

Capital markets activity nationally and locally remains solid, though some softening is occurring consistent with property performance, says Alexander Paul, managing director of national market research, NGKF. The capital markets outlook indicates that sales volume in the Bay Area for office and apartments will be below 2016 levels but sturdy during the mature phase of the cycle. Paul says pricing is expected to edge down and cap rates will likely edge up in the period ahead.

The Bay Area's extraordinary recent market performance reflects the region's many strengths, however, that level of success could never be sustained, Paul says. A softer landing is expected more so than in prior cycles due to the presence of ubiquitous technology and the Bay Area's status as the global technology capital.

The region's traffic and high housing prices are hurdles, but economic growth driven by innovation will help the region overcome those challenges, experts said at the Benchmarks event. In addition, collaboration, flexibility and productivity will drive demand for office space and apartment units, though demand is tapering.

“The Bay Area commercial real estate market is facing a number of challenges in the period ahead, including decelerating job growth, and constraints on office and apartment rent growth,” Paul tells GlobeSt.com. “And yet, the region remains a top choice for investors foreign and domestic, as well as a source of remarkable innovation that will drive long-term demand for office space and residential units. Disciplined and thoughtful investors will have numerous opportunities of which to take advantage.”