Finding an office space in downtown San Mateo is now near impossible, with the latest statistics from Colliers International showing the vacancy rate has hit 1.54 percent.
This is a huge drop from just the first quarter of this year when the vacancy rate was just more than 3 percent. The average asking price for an office space in downtown San Mateo has also risen to $3.59 per square foot a month, still lower than places like downtown Palo Alto. Downtown Palo Alto’s average is now $8.59 per square foot a month since a lot of new development is happening and new buildings will get substantially higher rents, according an August 2014 report from Colliers.
These numbers should not be alarming though given the small size — a total of 15,961 square feet — of vacancies in downtown San Mateo, said Mike Cobb, senior vice president of Colliers International’s Peninsula office.
“In a small market like that, those kind of fluctuations, it’s hard to say there’s a trend line with that,” Cobb said. “You add two office spaces to that and that’s going to have an effect on vacancy. The thing to watch in downtown San Mateo is the rents that have gone up a decent amount.”
Rents are still not incredibly high since it’s a situation in which the rentals available are less desirable and what’s left is just at a lower asking rate, he said. There are other restrictions that have limited the amount of office space downtown. A city ordinance passed in 2000 bars the establishment of ground-floor offices in downtown.
This trend of low vacancy should level out, but in the last six months the office space vacancy rate has slid quickly, said Bruce Bean, owner of The Trafton Group, a commercial real estate services company.
“What has basically happened is the dot-comers have now discovered San Mateo is halfway between San Francisco and Silicon Valley,” he said. “It’s kind of a happy location for young dot-comers who want to live in the city and the high-tech groups that are down further in the valley.”
Another new feature, and ultimate draw, of downtown has been Draper University, an entrepreneurship program run by venture capitalist Tim Draper.
“I think just in terms of the economy and dot-com situation, we’re hitting a peak that will potentially level out and demand won’t be quite as high,” Bean said. “Prices will level out.”
Alain Pinel Realtor Ken Constantino, who specializes in residential and commercial properties, owns and manages office buildings in downtown San Mateo.
“It’s very vibrant and there’s tremendous demand for obviously a very limited supply,” he said. “We don’t have any vacancies and we don’t have any notices to vacate. Look at all the small tech companies that have come here. A lot of other people like to work and live downtown. It’s not all restaurants, there’s a lot of offices too.”
The downtown area also have other strengths, including the fact that it’s near a Caltrain station and has access to express service through the baby bullet trains, Cobb said.
“Companies want to have access to amenities and bigger downtowns,” Cobb said. “This is where the tech companies want to be; it’s checking all the boxes for what’s in demand. Going forward that downtown pocket will do really well.”
Overall, in San Mateo, the total vacancy for office spaces is 9.71 percent, while the average office rent cost is $3.52 per square foot per month.
Meanwhile, during August, Classic Party Rentals leased a 96,795 square feet of warehouse space at 1635 Rollins Road in Burlingame. Advanced Cargo & Roadex America leased 46,248 square feet of warehouse space at 401-403 E. Grand Ave. in South San Francisco, while the 25,262-square-foot industrial space at 239 Utah Ave. in South San Francisco was leased by Munchery. The vacancy rate for San Mateo County has continued to decrease and now is at 3.89 percent, according to the report.
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