By Robert Sammons, Senior Director, Northern California Research
We have just released our Q1 2019 Market Report for San Francisco, which reflected continued strong market fundamentals and leasing activity for San Francisco. Below are some of the key commercial real estate and economic market highlights from the report:
In the past six months there have been two large pre-leases in San Francisco on proposed sites that have yet to reach entitlement; 325,000 square feet (sf) to Salesforce at Transbay Parcel F in the South Financial District and nearly 490,000 sf to Pinterest at 88 Bluxome Street in SoMa. More than anything, these transactions speak to the scarcity of large block supply in San Francisco and are examples of big space occupiers opportunistically ‘putting their stake in the ground’ to secure the future opportunity to grow their workforce in San Francisco.
Lease commitments have been made in both developments five years in advance of expected completion which is quite unusual. By comparison, recent new leases for 100,000 sf or greater in San Francisco have, on average, been signed 15 months prior to occupancy.
- The San Francisco metropolitan division (San Francisco and San Mateo counties) closed February with an unemployment rate of just 2.3%, down from a revised 2.5% in January and below the year ago figure of 2.5%. Office using positions grew by a surprising 5.1% year-over-year (YOY), a full percentage point increase from the 4.1% growth over the previous 12-month period. Total private sector jobs increased by 4.0% to 1,032,400.
- Asking rents in San Francisco reached new highs yet again! The Citywide overall asking rent closed at a record $77.26 per square foot (psf), up 8.2% YOY. The CBD Class A direct asking rent was a record $84.16 psf, up 9.7% YOY.
- Vacancy was just above the 10-year low of 5.6%. The Citywide overall figure was 5.8% at the end of the first quarter, falling 60 basis points (bps) from the fourth quarter and down nearly 2% from one year ago.
- Citywide new leasing totaled 2.3 million square feet (msf); well above the 10-year quarterly average of 1.8 msf.
- Active tenant requirements increased significantly in the first quarter, up 1.3 msf over the quarter and 1.7 msf over the year ago figure to 6.5 msf. Large block demand greater than 50,000 sf has climbed 41% YOY and far outpaces supply. There are currently 20 tenant requirements of 100,000 sf or more but only five contiguous space options that can offer occupancy through 2023.
Take a look below to access our full San Francisco Q1 2019 office market report plus our Six Quick Stats market infographic.
This post is commentary from the latest weekly edition of our NorCal Newsline, which you can subscribe to for free by e-mailing firstname.lastname@example.org.
Robert Sammons is Cushman & Wakefield’s Senior Director, Northern California Research. Based in San Francisco, Robert’s principal roles include working closely with the C&W research teams across the Northwest – including Northern California, Portland and Denver. Robert is author of numerous documents that delve into a wide variety of real estate and economic trends. He has been a quoted source for all manner of real estate and related economic information in many widely known media outlets across the country. Robert has 29 years of real estate experience as both an appraiser and researcher. He earned a BBA in Real Estate from The University of Georgia and an MS in Real Estate from Georgia State University. Robert is a member of the Urban Land Institute.