Posted by: BayAreaComRE | January 28, 2011

2010 “The Comeback Kid” and Beyond!

By Jon Dishotsky

The following quarterly update will be my last post for BayAreaComRE.com. When I founded the site with Justin almost 2 years ago, I never thought it would have become what it has. I am grateful for the experience and wouldn’t change it for anything. I’m leaving this blog in very capable, and undoubtedly more qualified hands in social media guru Justin, who I know will take the content and exposure to the next level. The next stages for me include laser-like focus on deal-making (my actual career haha!), the growth of our Tenant Representative team and the growth of Cushman & Wakefield’s Young Leaders Group on a national scale.

January 2011

2010 can only be described under one name: The Comeback Kid.

The beginning of last year was categorized by companies, investors and the like, dusting off the cobwebs from 2009. By the end of 2010, article after article came out saying that the technology sector was experiencing another boom, and that commercial real estate assets in core markets, including the San Francisco Bay Area, were experiencing a frothy uptick. What can we take away from all this? The recession of yesteryear is behind us, most if not all markets have at least stabilized, and there is a return to what is being coined as the ‘new normal’. We have pivoted into a business environment in which deals take more due diligence, lending requires more scrutiny, but new values are being achieved with returns that once again feel healthy rather than a preservation of capital.

Moving Forward

The Bay Area is poised to have a very optimistic 2011. The Federal Reserve’s beige-book cited the San Francisco region as faring much better than most parts of the country, specifically as it relates to commercial real estate. “In a positive sign,” the report said, “investor demand for well-leased office buildings continued to boost market values in some of the district’s major commercial markets, such as San Francisco.” Furthermore the report went on to cite the ability for local companies to attract financing, “venture capital financing was a bright spot, with contacts noting increased investor interest and funding for early-stage technology companies.”

A Scene From the Social Network Movie
‘The Social Network’ – Based on Palo Alto’s Facebook

We’re once again at an interesting inflection point, when a market corrects upward, leverage changes hands. Are we moving toward a more landlord friendly environment in which multiple offers and competitive situations arise between credit tenants? Will there be investors battling it out over acquisition targets only to push asset valuations to numbers that no longer make sense? That remains to be seen. What is certain is that the San Francisco Bay Area is a very technology-centric metropolis, often romanticized like in the Golden Globe winning, Academy award nominated movie ‘The Social Network’. This holds very true to real estate (Facebook is said to be closing on a new 1 Million square foot campus this quarter) and more specifically as it relates to rental rate spikes. An interesting trend we like to track is the correlation between the NASDAQ average and rental rates in the Bay Area (below San Francisco class A rates are used as an example).

4Q10 Trends

This will be a very telling trend to follow over the coming year. We’re confident that 2011 will be great, feel free to reach out regarding your real estate, we’re never too busy to return a call or email.

For your markets respective reports, please click the following link to access:

San Francisco Bay Area Market Reports

Jon Dishotsky joined Cushman & Wakefield in 2004. He is currently a member of a tenant advisory group that assists corporations in every stage of the real estate process. Typical projects include strategic planning, site selection analysis, portfolio assessment, transaction management and financial structuring. Jon excels in assisting early, mid and late stage funded start-ups in managing growth and staying nimble. He was recently awarded with Cushman & Wakefield’s Northern California Rookie of the Year, 2008. http://www.linkedin.com/in/jondishotsky

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