
California has the largest and most diverse commercial office market in the U.S. with 1.3 billion ft2 of commercial office space. Of this space, 10% is owner-occupied. The remaining 90% - about 1.17 billion ft2 - is leased.1 California’s market is comprised of several distinct sub-sectors.
- Central Business Districts (CBDs) are characterized by large Class A office towers and occur principally in the large urban areas of Sacramento, Oakland, San Francisco, San Jose, Los Angeles and San Diego.
- Suburban Office Parks. Outside of the main CBDs are dense clusters of suburban office parks, usually comprised of ”mid-rise” offices (5 to 10 story buildings) or “flex” buildings (a hybrid of research and development and office space). Silicon Valley, Orange County and the northern markets of San Diego are examples of these markets.
- Fragmented Markets. Outside CBDs and their surrounding markets, the office market is highly fragmented, consisting of various product types of all classifications.
Most Class A office space in California is clustered in large CBD markets. Lower quality or aging building stock is more prevalent in secondary and tertiary markets.
Source: CoStar Market Data, April 20092
Less than 10% of California’s office buildings are presently certified “green”. Those that are either LEED® or ENERGY STAR certified are typically premium Class A buildings concentrated in the major real estate markets. There is a severe scarcity of Class B certified buildings in secondary markets and Class C green certified buildings in all markets. This lack of inventory creates significant challenges to green-minded businesses that are not candidates for Class A buildings.
Source: CoStar Market Data, April 20092
1. Navigant Consulting using CoStar market data
2. 'Other' denotes smaller commercial office markets in California including Marin/Sonoma, Salinas, Bakersfield, San Luis Obispo/Paso Robles, Stockton/Modesto, Santa Barbara/Santa Maria/Goleta, Fresno, and Santa Cruz/Watsonville.
Investment-grade properties built after 1980 and typically greater than 10 stories that command the highest rents or sale prices compared to other buildings in the same market. Such buildings are well located and provide efficient tenant layouts as well as high quality one-of-a-kind floor plans. These buildings contain modern mechanical systems, and have above-average maintenance and management as well as the best quality materials and workmanship in their trim and interior fittings. They are generally the most attractive and eagerly sought by investors willing to pay a premium for quality.