A pair of electric car companies are offloading more than 200,000 square feet of industrial space in San Jose and the East Bay, while other EV companies are expected to be the next wave of industrial tenants in San Francisco.
Lucid Motors has put its 161,000-square-foot facility at the Morton Commerce Center in Newark for sublease, according to a report by Cushman & Wakefield. News of Lucid Motors’ decision to offload industrial space comes as the company prepares to lay off 18 percent of its workforce. The East Bay industrial campus was sold to Terreno Realty for $186 million in March.
Meanwhile, Shanghai-based NIO will not renew its full-property lease of an R&D industrial property at 3200 North First Street in San Jose, according to a report by Trepp. NIO was paying $22.92 per square foot on the 85,000-square-foot building and will vacate the premises when the lease expires in November. NIO will most likely not leave San Jose, however, due to its 200,000-square-foot lease of another industrial building on Zanker Road.
While these companies are offloading space in Silicon Valley and The East Bay, EV and autonomous car companies are driving industrial demand in San Francisco. A first-quarter industrial report from Yardi shows the Bay Area was up to an average rent of $12.24 per square foot in February 2023, more than 7 percent higher than the same time last year and slightly higher than the national industrial increase in the same time frame. The average signed rent in the last 12 months was even higher at nearly $13.50, compared with about $9 nationally.
“Driven by government incentives and a race among automakers to grab market share, the electric vehicle industry looks poised to fuel growth in the industrial sector for years to come,” the report reads.
Overall, the Silicon Valley and East Bay industrial markets have slowed down from their red-hot 2022, according to Cushman & Wakefield. Sublease space now accounts for 24.6 percent in Silicon Valley, while just accounting for 29 percent in the East Bay; both were under 20 percent a year ago.
Leasing activity decreased in the first quarter, recording just 757,000 square feet in Silicon Valley. This is less than half the number leased in the fourth quarter. In the East Bay, leased totaled 2.4 million square feet, the lowest amount since the third quarter of 2020.