Commercial Operations Adds Sonoma County Industrial Park

Woodmont’s Commercial Operations added a two-building, 40,000-square-foot industrial asset to its managed portfolio to get the year started. Located at 150/170 Professional Center Drive in Rohnert Park, the property has eight tenants, including Pathway’s Charter Schools, Marin Wellness, Strategic Industries, and BA Electric.

The business center is owned by Turo Partners.

President Scott Pritchett, CPM®, RPA®, said that in the next two years his team will be considering several capital improvement projects at the property, including roof replacement, a new HVAC system and asphalt work.

Donette Garverick is the Regional Manager assigned to the property. Mike Flitner, with Keegan & Coppin Company, is the leasing broker.

BOMA Silicon Valley Outlook 2025

Woodmont’s President of Commercial Operations Scott Pritchett CPM^® moderated the annual broker panel for the first quarterly BOMA Silicon Valley luncheon of the year in San Jose. Opening remarks included AI’s growth and Bay Area venture capital investments in the sector. Among the factoids: the Bay Area’s GenAI footprint is expected to grow 200% in the next 24 months. Companies attracted over 80% of global venture funding for GenAI in 2024. And, the Bay Area is now home to approximately 820 AI headquarters, compared with runner-up New York City with about 230.

Pritchett then welcomed the luncheon crowd of approximately 120, and introduced the first speaker.

L-R: Scott Pritchett, Mark Christierson, Sean Yamagiwa, James Chung, Gene Williams

(Sean Yamagiwa is the 2025 BOMA Silicon Valley Chapter President; he is a Property Manager, Asset Services-Northern California, with Cushman & Wakefield)

James Chung, Founder, The Econic Company and previously head of Western Region Retail Real Estate for Cushman & Wakefield, presented market statistics and trends on retail real estate for both the South Bay and Peninsula.

Carrying over the strength of retail real estate the previous year, year-end Silicon Valley retail data shared by Chung showed that vacancy rates were still low: 4.4% valley-wide, 5.6% for neighborhood centers, 4.2% for strip centers and 5.1% for the market’s malls – compared with the national overall average of 8.8% retail vacancy.

By year-end, only 248,835 square feet of retail space was under construction, with half of that being a Costco on Lawrence Expressway.

Mark Christierson, Executive Vice President with CBRE launched into his office and R&D presentation with a bit of rare good news for the office sector. Silicon Valley’s fourth quarter 2024 featured the first quarter in two years in which the submarket experienced positive net absorption – of 1 million square feet. That dropped the office vacancy rate from 20% to 18%.

Additionally, 6 transactions were completed involving 100,000-square-foot leases or greater, which is often considered a benchmark for strengthening activity. Christierson relayed that the look of the current market is reminiscent of post-dot.com and post-Great Financial Crisis office-market recovers, which each took nearly four years to recover.

As usual, the R&D sector is more balanced in terms of supply and demand, with the vacancy rate falling to 11.6% in the fourth quarter, from 11.9%. R&D space was less impacted by the pandemic in general and subsequent remote work trends for office users, as R&D inventory is frequently used for lab work, testing, assembly and related uses that require a physical presence.

On return-to-office (RTO) trends, he noted that most Silicon Valley companies have resumed in-office days to 4-5 per week, and that “C-suite leaders really want people back in the office.”

Gene Williams, Managing Director, Valbridge Property Advisors, presented an overview of the capital markets and what to expect for 2025. Highlights included:

• The MBA (Mortgage Bankers Association) predicts loan volumes will increase 16% this year.
• Office loans represent the largest segment of loans maturing, at 22.7%.
• Life insurance companies tend to be the most active source of capital in volatile markets, because they offer non-recourse loans and rate locks.
• Retail has become the favorite asset class for investing in recent years.
• Cap rates are holding steady, at about 150-200 basis points higher than in 2022. The average office cap rate is 6.9%, it’s 4.6% for multifamily and 5.5% for Silicon Valley retail properties.

Referencing pricing and sale-price discounts, he noted the late February, $54 million sale of the Pruneyard Office Towers in Campbell sold for a 62% discount compared with its previous sale in 2019 of $141.5 million. PSAI Realty purchased the asset from Oaktree Capital Partners and Ellis Partners.

Pruneyard Tower One is 18 stories with 119,000 square feet, while the single story, Tower Two is six stories with 127,000 square feet.

Williams concluded by offering a warning about stagflation, an economic situation marked by the decline of gross domestic product (GDP) combined with rising inflation. The last time the U.S. went through a stagflation cycle was in the 1970s, and the nation emerged from it via increased consumer spending and also population growth – neither of which are likely to happen anytime soon.

Words of Wisdom: In closing, Scott Pritchett inspired the audience to conclude the BOMA luncheon, citing his source and life coach, Ted Lasso.

• Let it go – we can get worked up about one thing or another but it rarely matters
• Ignore them—the negative news is loud, daily and persistent, don’t let it get to you
• Give it time – Patience remains one of our better virtues, and good things sometimes need time to develop
• Don’t compare – this is a waste of time, just be who you are, and control YOU
• Stay calm – there are few good outcomes if we panic, and as the British say, “carryon”
• It’s on you – be responsible and “own” your actions
• Believe – in yourself…your team…your process
• Always smile, and pay it forward