The East Bay/Oakland industrial market demonstrated remarkable resilience in Q2 2025, navigating economic headwinds and evolving tenant priorities with steady fundamentals and strategic repositioning.

Market Trends Snapshot

• The East Bay/Oakland industrial market saw a notable shift in Q2 2025, with the vacancy rate climbing to 9.2%, up from 6.5% a year ago. This marks the sixth consecutive quarter of negative net absorption, underscoring a period of sustained occupancy losses as tenants recalibrate their space needs.
• Despite the elevated vacancy, asking rents remained resilient at $1.30 per square foot, dipping just 1.4% from Q1 but still up 15.6% year-over-year, reflecting the region’s long-term value proposition.
• On the development front, construction activity has slowed significantly. Less than 100,000 square feet of new space is currently underway—down sharply from 835,203 square feet last quarter. However, the market welcomed 1.3 million square feet of completed deliveries so far this year, adding fresh inventory to meet evolving tenant demand.

Leasing Activity & Tenant Trends

• Leasing volume reached approximately 1.9 million square feet, a slight dip from Q1 but consistent with seasonal patterns.
• Third-party logistics (3PLs) and retail distributors remained dominant, accounting for over 60% of new leases.
• Notable deals included Amazon, FedEx, and Costco, each securing space in the I-880 Corridor and Richmond submarkets.

Vacancy & Availability

• Overall vacancy rose modestly to 5.3%, driven by speculative deliveries and tenant relocations.
• Class A product in core submarkets like Hayward and Fremont continues to outperform, with vacancy rates below 3%.
• Sublease space increased to 1.2 million square feet, signaling cautious optimism among tenants adjusting footprints.

Rents & Investment Activity

• Asking rents held firm at $1.45 per square foot/month, reflecting landlord confidence and limited new supply.
• Investment sales slowed slightly, with cap rates stabilizing around 5.1%. Institutional buyers remain active, especially for infill assets with strong transportation access.

Development Pipeline

• 2.8 million square feet of industrial space is under construction, with major projects in Oakland Airport and Union City.
• Developers are prioritizing ESG-compliant designs, including solar integration and EV infrastructure, to meet tenant sustainability goals.

Outlook

Despite macroeconomic uncertainty, East Bay/Oakland’s industrial market remains a magnet for logistics, e-commerce, and retail distribution. With strategic location advantages and a robust tenant base, the region is well-positioned for long-term growth.

Market Observations

Economy

• The East Bay’s unemployment decreased by 50 basis points in the fourth quarter and currently stands at 4.8%.
• This rate is 60 basis points higher than the national average.
• Industrial employment sectors showed mixed trends:
  • Year-over-year growth in trade, transportation services, and manufacturing employment.
  • Decline in construction employment.

Major Transactions

• WPT Capital Advisors, LLC acquired the Pinole Point Distribution Center in Richmond from JLL Income Property Trust:
  • The property includes three buildings totaling 518,000 square feet.
  • Largest occupant, Williams Sonoma, occupies 252,375 square feet at 6000 Giant Road.
  • Subsidiary chocolatier Easton Malloy occupies 41,365 square feet at 6025 Giant Road.
  • The building at 6015 Giant Road was vacant at the time of sale.
• Largest lease transaction of the quarter:
  • NorCal Moving signed a lease for 125,700 square feet at 31129 Wiegman Rd. in Hayward.
• Largest lease renewal:
  • Forward Air Corporation renewed 135,860 square feet of space in Union City.

Leasing Market Fundamentals

• Continued decrease in demand led to:
  • Negative net absorption of 303,825 square feet in Q4 2024.
  • Negative absorption totaling 4.5M square feet for the year.
• Vacancy rates remained stable at 7.5% quarter-over-quarter, with most vacancies in warehouse/distribution buildings:
  • Vacancy rates for all product types stable between Q3 and Q4.
  • Overall availability rate at 9.4%, with 2.3% sublease space.
• Asking rates showed minimal decline:
  • Softer deal rates observed, especially for less functional buildings.

Outlook

• Development pipeline expected to complete delivery by early 2025.
• New construction starts projected to hit their lowest levels in 10 years:
  • Robust planned development pipeline as developers await shifts in market fundamentals.
• Tenant demand expected to increase throughout 2025:
  • Meaningful decline in overall vacancies anticipated by 2026.

Metro Employment Trends Show a Gradual Recovery

As of now, the East Bay Area’s unemployment rate stands at 4.8%, reflecting an increase of 20 basis points compared to the start of 2024. This figure is 60 basis points higher than the national average and remains above pre-pandemic levels.

Office-Using Employment Down

Manufacturing experienced the largest loss in growth for industrial using sectors year-over-over, while construction also experienced negative growth, and trade/transportation/utilities
increased slightly.

Industrial Employment Strong but Not Immune to Softening Conditions

Since the pandemic spike, Trade/Transportation/Utilities and Manufacturing year-over-year growth has come back down close to pre pandemic levels. Trade/transportation/utilities
finished the year with slightly positive year-over-year growth. Manufacturing has had negative year-over-year growth since July of 2023.

Vacancy Remains Up Year Over Year

Vacancy rates in the East Bay remained stable quarter over quarter, while absorption went deeper into the negatives. There was no new construction delivered in the fourth quarter of
2024, although there is approximately 1.3 MSF currently under construction.

Industrial Leasing Activity Increased

In the fourth quarter of 2024, overall leasing activity experienced an increase of almost 450k square feet from the prior quarter. The majority of the leasing activity this quarter
happened in Hayward and Fremont. Leasing in these two submarkets represented about 49% of the total square footage leased in the quarter.

Industrial Sublease Availability Continued to Climb

In the East Bay, sublease space increased by another 175,000 SF, now totaling 4.7 MSF. Of this space 59% is represented by 18 spaces over 100k. Across the East Bay industrial market, the amount of sublease space has doubled since the beginning of 2023.

Industrial Supply Pipeline

There was no new construction starting in the fourth quarter. Approximately 1.3 million square feet of construction activity was recorded in the market, all of which is scheduled to be delivered in the early part of 2025.

Industrial Asking Rent Growth Declines

Industrial average asking rents remained largely flat quarter over quarter while asking rent growth declined by nearly 12% year over year.

Conclusion

The East Bay industrial market faces a challenging yet promising landscape as we move into 2025. While rising vacancy rates and slowed construction activity reflect the lingering effects of economic pressures, the region’s resilience shines through. With anticipated improvements in employment growth and business optimism, coupled with a limited supply of new developments, the market is poised for gradual recovery. Stakeholders should remain vigilant and adaptable, leveraging emerging opportunities to navigate this evolving environment effectively.

The Bay Area’s industrial real estate sector remained resilient through the close of 2024, signaling key opportunities and challenges as we move into 2025. With a total of 2.4 million square feet under construction and 2.1 million square feet delivered year-to-date, the region continues to respond to tenant demand while navigating economic headwinds.

Market Highlights: Stability Amid Change

The fourth quarter witnessed a balanced performance across the Bay Area’s industrial markets:

• Average Asking Rents: $1.42 per square foot (Net Net Net), with warehouse rents averaging $1.35 and manufacturing spaces at $1.58.
• Vacancy Rates: The overall vacancy rate stood at 5.2%, reflecting stability despite ongoing economic uncertainty.
• Net Absorption: While Q4 recorded a relatively modest net absorption of 59,000 square feet, the year-to-date figure remained in the red at -5.5 million square feet.

Notable Leasing Activity

High-profile transactions in Q4 indicate continued tenant interest in strategically located spaces:

• Forward Air: Renewed 135,860 square feet in Oakland.
• Biagi: Signed a new lease for 128,000 square feet in Napa/Solano.
• US Auto Force: Leased 116,415 square feet at 2000 Maritime Street, Oakland.

These deals highlight the strong demand for warehouse and logistics hubs in key submarkets like Oakland and the Peninsula.

Investment and Sales Trends

Industrial property sales activity cooled in Q4, with notable transactions including:

• EQT Exeter’s purchase of two Napa/Solano properties for over $200 million combined.
• WPT Capital Advisors’ acquisition of 6000-6025 Giant Road, Oakland, for $132.5 million.

Despite a slowdown in volume compared to earlier in the year, the total sales for 2024 exceeded $800 million, reflecting sustained investor confidence in the Bay Area’s industrial market.

Looking Ahead: Trends and Predictions for 2025

As we step into 2025, the Bay Area industrial market is poised for a dynamic year, shaped by these key factors:

1. Tenant Concessions: These are expected to persist as landlords adapt to economic conditions and a high inventory of available space.
2. Rising Confidence: With a new administration and a focus on improving business conditions, landlords and tenants are likely to feel more confident in making long-term decisions.
3. Absorption Challenges: While new construction continues to bring supply into the market, sustained leasing activity will be crucial to balancing vacancy rates.

Stay tuned to EastbayWarehouseSpace.com for comprehensive updates and insights as the Bay Area industrial market evolves in 2025.

The East Bay industrial real estate market demonstrated resilience and steady demand as it closed 2024, paving the way for promising trends heading into 2025. With over 1.6 million square feet leased in the fourth quarter alone, the region is poised for growth despite broader economic uncertainties.

Leasing Momentum and Key Transactions

The final quarter of 2024 saw remarkable leasing activity with 25 agreements signed, showcasing the market’s strength. Average starting rents for these leases settled at $1.21 NNN, with an average term of 57 months. Significant deals include:

• Forward Air: Renewed 135,860 square feet on Eigenbrodt Way, Union City.
• Chetak: Signed for 126,456 square feet on Whipple Road, Union City.
• US Autoforce: Secured 116,415 square feet at 2000 Maritime in Oakland.
• Nippon Express: Renewed space on Danti Court in Hayward.
• Iron Mountain: Renewed 98,125 square feet on Factor Avenue in San Leandro.

With moderate net absorption reaching 101,000 square feet in the fourth quarter—the highest since Q3 2023—the market enters 2025 on solid footing.

Market Resilience Despite Challenges

Throughout 2024, the East Bay industrial market showed remarkable stability amid economic uncertainty and high federal interest rates. Vacancy rates, availability, and asking rents held firm, even as annual net absorption turned negative for the first time in recent history. Early 2025 occupancy from December leases is expected to help drive a positive start to the new year.

Sales Activity in Transition

While industrial property sales slowed toward the end of 2024, the year witnessed significant investor interest, closing with over $804 million in sales volume, averaging $239 per square foot. The fourth quarter alone recorded four property transactions totaling $143 million.

What to Expect Going Into 2025

The outlook for 2025 brings renewed optimism to the East Bay industrial market. With a new administration pledging to improve the business climate and reduce inflation, landlords and tenants are likely to regain confidence in executing long-term decisions. Tenant concessions are expected to remain prevalent, and rents should hold stable until some of the 10.6 million square feet of available space is absorbed.

Deal activity is anticipated to pick up in the first half of the year, and East Bay industrial real estate will continue to be a key driver of regional growth. Keep an eye on EastbayWarehouseSpace.com for updates and insights as the market evolves in 2025.