With San Francisco's office market commanding some of the nation's priciest rents and assets, tenants and investors have looked slightly north for big discounts and growth.

Subject to the world's most expensive construction costs, builders in Marin County historically had to contend with a lukewarm-at-best attitude toward development, mostly regarding residential construction. In an example that could have eventually affected zoning requirements nationwide, a pair of Marin property owners filed a lawsuit against the county for its inclusionary housing fees in a case the Supreme Court declined to hear on Dec. 9, 2019.

But the attractiveness of opportunities for commercial real estate in Marin has pushed some local attitudes into welcoming territory.

In November, global real estate investor Kennedy Wilson turned to Hamilton Landing, a seven-building, 406K SF office campus in Marin County that it picked up for $115M from ScanlanKemperBard Cos. and Independencia Asset Management.

At about $280 per SF, the Class-A complex in Novato cost Kennedy Wilson a fraction of what the same building 25 miles away in San Francisco likely would. Its spot in central Marin County also positions it well to reap some of the market's growth, Kennedy Wilson Managing Director Avik Mukhopadhyay said.

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"When coupled with the current development costs levels, this type of development would be hard to replicate in today’s environment," Mukhopadhyay told Bisnow.

The area is poised to see office inventory growth too, Newmark Knight Frank Senior Managing Director Tom Poser said. Both Poser and NKF Executive Vice President Haden Ongaro, two-thirds of the team marketing available space at Hamilton Landing (along with NKF Managing Director Mark Carrington), said attitudes against development are starting to soften.

A veteran in North Bay commercial real estate, Ongaro cited a recent senior housing hearing in San Rafael that that showcased increasingly dire demands for housing of all types in the area.

Aside from public sentiment, Marin County's CRE investors and tenants have other factors going for them. 

In the last decade, its northern submarkets like San Rafael and Novato have lagged behind central and southern Marin towns like Corte Madera and Mill Valley, as companies further north lacked the same access to the rest of the Bay Area as those in the south.

The office vacancy rate in central Marin County, for instance, came in at 6.4% in Q3 2019, compared to 17.5% for north San Rafael, according to Newmark Knight Frank data.

But recent improvements to Sonoma-Marin Area Rail Transit, or the SMART train, could open up more companies to northern Marin. Along with expanded service, SMART has new stations in Novato and Larkspur, which connects riders via the Larkspur Ferry Terminal by water to downtown San Francisco. 

"I do think it will make Marin more viable. It allows people to live outside of Marin and get to Marin without using their car," Ongaro said.  "Now that there is linkage to public transportation, in some ways San Rafael and Novato may be more accessible than southern Marin, which doesn't have a SMART station."

Hamilton Landing, which was about 92% leased by companies like Take-Two Interactive Software and Activision at Kennedy Wilson's time of purchase, sits about half a mile from one of Novato's three SMART stations. The investor sees it as an asset with "strong cash flow and high growth potential," according to Mukhopadhyay.

"I'm encouraged that, with SMART and more receptiveness to housing, Marin will become an even better place to grow a business," Ongaro said.