EDR Insight’s Market Confidence Index: Bay Area

Survey results reveal a clear distinction in how area environmental due diligence professionals view the strength of the Oakland vs. San Francisco markets: a solid 85% characterize Oakland as a growing market, and a less sanguine 54% for San Francisco.

Rounding out our series of metro-specific market summaries, we are releasing the results from our Due Diligence at Dusk workshop  http://edrnet.com/dddseminars/  on December 7th in Oakland. Below is a capsule summary of both the Oakland and San Francisco markets, factors driving commercial real estate opportunities, the area’s top challenges and a sense of how local professionals feel about the near-term forecast.

What Makes Oakland and San Francisco Stand-Outs?

Here are a few notable trends that bode well for anyone working in the commercial real estate markets of Oakland and San Francisco:

  • San Fran is the 10th hottest market in the US for overall real estate prospects, and Oakland isn’t far behind at 14th (up from 16th last year), according to the Urban Land Institute/PricewaterhouseCoopers Emerging Trends in Commercial Real Estate report.
  • Oakland’s office market has bragging rights as the 2nd strongest office market in the U.S. (behind NY-Brooklyn), and the 6th most robust multifamily market.
  • The Oakland economy is easily outperforming the nation, and benefits from a lower cost of doing business in Oakland compared to the pricier San Francisco market.
  • Growth may be slower in the next few years compared with the last few years, but the pace of real estate activity is still projected to be relatively strong compared to other top metros.

EDR’s ScoreKeeper 3Q16 report shows that Oakland Phase I ESA market was relatively flat year on year, while San Francisco’s was up 9% in the third quarter. Based on the survey results, Oakland could well surpass its neighboring metro’s growth next year. It is worth noting that California has more metros in the Top 50 Markets for Phase I ESAs in the U.S. than any other state with a total of eight. Oakland ranks as the 18th largest Phase I ESA market in the U.S., and San Francisco the 22th.

The results of our Oakland/San Francisco Market Confidence Survey, conducted the week prior to DDD, characterize the market as follows:

  • 85% of area EPs view Oakland as a growing market for due diligence (18% characterize it as “growing quickly” and 67% “growing slowly”)
  • 54% view San Francisco as a growth market (with an even split between “rising quickly” and “slowly.”)

 “Environmental due diligence has become very important in the entire Bay Area…specifically in the South Bay with the amount of expansions in the tech space.”

~ local environmental professional

  • Significantly, not one survey respondent views either metro as “declining” although 46% believe that the San Fran market has peaked and is plateauing.
  • In terms of aversion to environmental risk, local EPs scored their commercial real estate lender clients as a 3.46 on a scale from 1 to 5 with 5 being the most risk averse; investor clients were slightly less averse at 3.08.
  • Interestingly, Bay Area EPs believe that their clients are significantly more sensitive to turnaround time than to Phase I ESA pricing.
  • Report delivery time, intense competition and finding qualified new hires are the area’s top challenges.

The Outlook

It is reassuring to see that area consultants are confident about the local market outlook, giving Oakland a more optimistic 3.85 and San Fran 3.67 on a scale from 1 (very pessimistic) to 5 (very optimistic).

“Hot now and likely will be through next year. Expect a slowing after that.”

~ Local environmental professional

Bay Area Market Confidence Index

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EDR Insight would like to thank all of our Oakland and San Francisco area consultants who participated in the survey.

The final installment in EDR Insight’s Fall DDD Metro series will be for Seattle, and published shortly.