In Certain Submarkets Industrial Worth More Than Class A Office Buildings

Our office recently sold two commercial buildings in the city of Concord, California, located about 30 miles to the East of San Francisco out in the suburbs. One was a 180,000 square foot Class A office building with six stories of subterranean parking, and full-service rental rates in the $2.65/rsf range. Walking distance to Bart, close to retail and amenities and loaded with extras like exercise and conference facilities for the tenants. It sold for only $187/rsf! Meanwhile, also in Concord our office sold an 18,000 square foot industrial building for an effective sale price of $200/rsf. Why would an industrial building sell for more per square foot than a Class A office building? The turnover cost of office product can easily run $40-70/rsf, and it can sometimes take six to twelve months or longer to locate a replacement tenant. Industrial, on the other hand, with a 2% vacancy factor leases like hot cakes and usually in on an as-is basis.