Office and Industrial Real Estate Slowdown

The CIM Group out of Los Angeles had plans for a 1.1 million square foot office tower in downtown Oakland, but is now proposing a 487 foot tower to build 600 residential units. This would be the tallest building in Oakland. According to CoStar News, “While to pivot is a boost of momentum for Oakland’s recovering housing market, it’s a reflection of the struggles of the Bay Area’s office sector, where leasing activity and rent growth have declined.”  In the same news source, “Prologis plans to scale back spec development and instead focus on custom builds as volatility n the economy threatens to dampen demand”. I was at a meeting with various commercial brokers, and the apartment investment arena is now seeing challenging financing for apartment house sales, with 50% loan-to-value (in the past it was 60-70% LTV), and with interest rates up some purchases are negative due to cap rates being lower than the cost of financing. As interest rates rise prices may drop…and the all-cash buyer may be in the drivers seat in 2023…