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Mr.-John J. Jermanis City of San Leandro May 31,2000 Page 10 SEDWAY GROUP Real Estate and Urban Economics 3) The Marina's small development sites that preclude a critical mass of office space sufficient to "create" a new office district.' Similar conclusions may be drawn with respect to the potential for research and development (R&D) space at the Marina. The San Leandro R&D market is very similar to the office market (e.g., despite a low vacancy rate, the market is relatively small and rents are low). As a result of strong demand, the most likely trend with respect to the local R&D market, and to a more limited extent the office market, is the conversion of older industrial buildings to accommodate denser occupancies as older, heavy industries migrate to outlying areas. . Residential Potential residential uses at the Marina are limited to multifamily apartments. For-sale product (e.g., single-family homes, townhomes, or condominiums) is not possible as the land will not be sold. Homes or condominiums subject to a ground-lease are not familiar to Bay Area buyers and would not be accepted in the marketplace. The San Leandro apartment market has 35 apartment complexes with nearly 4,400 units.s Most of this inventory is dated as 80 percent of the units were built before 1980. There have been no new apartments added since four complexes were completed in 1987. The overall market performance has been good, with average occupancy levels in the 97 percent range. Average rents have increased by over 35 percent since 1996. Although the market average rent is about $950, or $1.25 per square foot, the newer complexes generally average $1,000 to $1,060 per month, or $1.35 per square foot. A new apartment product with good views and modem amenities would likely command average rents higher than that found in the current market. Sedway Group believes that there is strong market potential for additional apartment product in San Leandro, especially given the region-wide shortage of housing. The Marina location in particular would be attractive due to potential water and boat harbor views from upper floors. The development site located east of Neptune Drive would also be adjacent to the Marina Course and, depending upon the orientation of that portion of the course, could offer golf course views. This use merits. additional consideration and investigation with respect to regulatory, political and market issues. CONCLUSIONS Sedway Group believes the San Leandro Marina offers good potential for additional uses on currently vacant or underutilized parcels. The area offers a tranquil setting with very good bay and downtown San Francisco views, and recreational amenities such as a boat harbor, park, trails, and new golf courses. The existing businesses are successful despite minimal advertising, relying on local residents and businesses aiready familiar with the area. Additional uses will add to the critical mass at the Marina, making it a more attractive destination for a wider range of people. , This factor is based on the identified site areas and the maximum 0.3:1 floor area ratio. If the City were interested in pursuing office development, one potential way of achieving a critical mass is to aggregate some of the surface parking areas with one or more of the identified sites to create larger development areas. I This inventory consists of apartment complexes containing at least 50 units that were built after 1940.