A Glimpse into the Industrial Commercial Real Estate in San Joaquin County
Overview of the Current Situation
It’s no secret that markets fluctuate. Let’s dive into some of the specifics.
In Q3, we’ve witnessed some interesting trends. One of them being the rise of the industrial vacancy rate going from 7.5% to 7.8%. This is mainly attributed to the 1.4 million square feet of speculative construction that were delivered.
What else has changed, you ask? Asking rental rates have slightly decreased from $0.73 to now $0.71 per square foot NNN. Meanwhile, construction projects are not slowing down, with approximately 4.9 million square feet currently under construction, across six speculative projects, and one build-to-suit project[^1^].
On the bright side, the county didn’t fail to compensate for the negative absorption rate from the last quarter. The Q3 report shows a positive net absorption of 958,000 square feet, pushing the year-to-date number to 785,766 square feet[^1^].
Deliveries and Construction Projects Underway
With real estate developments moving at lightning speed, it’s necessary to focus on some key players in the arena. Buzz Oates, for instance, initiated the construction of two speculative warehouses with a total area of 217,455 square feet in Stockton Airport[^1^].
But they’re not the only ones taking big steps. First Industrial has also jumped into the fray – they’re developing a whopping 1,015,791 square foot speculative building in Stockton Airport, slated for completion by Q2 2024[^1^].
Q3 Leasing and Sales Activities
Some remarkable deals transpired in the last quarter. The significant leasing deals included the lease of 552,467 square feet at 600 Spreckels Ave in Manteca, while a space of 173,261 square feet was leased at 601-619 Tesla Drive in Lathrop[^1^].
Moreover, a notable transaction of a 203,040 square foot Stockton warehouse sold for $141.60 per square foot[^1^]. Deals like these hint at the region’s industrial real estate’s potential.
Zooming into Submarkets
In San Joaquin county, certain submarkets displayed fascinating trends in Q3. Take, for instance, the different vacancy rates. Tracy ended the quarter with a 6.8% vacancy rate, Lathrop was at 9.5%, Manteca recorded 4.0%, Stockton was 9.1%, and Lodi reported at 3.9%[^1^].
Moreover, while Tracy noticed a positive absorption of 584,186 square feet in Q3, Stockton experienced a negative absorption of 165,073[^1^].
These fluctuations suggest the dynamism of the commercial real estate market. They also underscore that, despite an overall positive trend, not all areas fare equally.
[^1^]: [CBRE research](https://www.cbre.com/research-and-reports)
Evolution of the Office Commercial Real Estate Market in San Joaquin County
Q3 Overview
In the third quarter (Q3), the office vacancy rate took an upward turn reaching 8.6% – a rise of 120 basis points. This quarter also saw a negative net absorption of 93,767 square feet. On a brighter note, the year-to-date absorption remained in the green zone with a positive 14,814 square feet. Is the slight dip cause for alarm? Not quite. Interestingly, at the same time, we saw the average rental rate per square foot fall to $1.82 from $1.94 in the last quarter. So, what’s going on?
Leasing and Sales
Leasing
We observed some significant lease transactions in the course of Q3. A perfect illustration is the leasing of 1,500 square feet space at 3133 W March Ln and 8,000 square feet at 220 E Channel St, both in Stockton.
Sales
The quarter’s sales volume stood a bit decent at $3.8 million, with eight transactions averaging $105 per square foot. A notable activity in the sales subsector was the sale of two Class A office condos, fetching an impressive average price of $331.29 per square foot.
Submarkets
It’s important to note that Stockton holds the lion’s share of the total office inventory by a massive 70%, totaling 5,397,973 square feet. When it comes to vacancy rates, different areas posted variable numbers; Stockton stood at 9.6%, Tracy at 10.6%, Lodi had 3.7%, Manteca scored 2.1%, Lathrop posted a towering 17.2%, while Ripon reported 0%.
Class Stats
On breaking down the 8.6% overall vacancy, it emerged that Class A space constituted 8.8%, and Class B made up 7.2%. Class A asking rental rates averaged $2.12 per square foot, while Class B rates averaged at $1.69 per square foot.
Outlook
If the rising vacancies and negative absorption trends continue, the office market might remain soft going into Q4. However, the softening is not necessarily a death knell for the market. Rather, it provides an opportunity for new or expanding businesses to lock in more favorable lease terms. And that friends, is the beauty of a robust and dynamic real estate market – everyone gets their day in the sun (NAIOP).
Changing Landscape in San Joaquin’s Industrial Commercial Real Estate
Industrial commercial real estate in San Joaquin County is experiencing noteworthy shifts. This change is manifested in rising vacancy rates, dropping rental asking prices, and an increase in construction projects. However, the story isn’t the same across all submarkets. Places like Tracy show an upturn in absorption while Stockton records a decline. Nonetheless, these shifts spell opportunities for the savvy.
State of Office Commercial Real Estate
There’s a noticeable alteration in the office real estate market too. A hike in the vacancy rate and a slump in net absorption in Q3 indicate these shifts. Yet, this isn’t a signal for despair. The softening rental rates indeed present a silver lining for businesses eager to lock in profitable lease terms.
A Market of Opportunities Amid Fluctuations
Market fluctuations are par for the course in any dynamic real estate environment. In light of this, San Joaquin County’s shifting real estate landscape unveils doorways for burgeoning businesses and new market entrants to stake their claim.
Forward-looking Perspective
Yes, there are hurdles and oscillations in the market, but potential for growth is equally present for those willing to chart the evolving terrain. As we peer into the future, it’s clear that only time holds the key to the continuing trajectory of these trends.