By Robert Sammons, Senior Director, Northern California Research
Job growth has continued in NorCal in the first few months of 2019. It has actually picked up year-over-year (March 2018 to March 2019) from the previous 12-month period. One might think that to be unusual in an economic expansion that has gone on so long now – in fact soon to be the longest in US history. For the San Francisco MSA, year-over-year (YOY) jobs increased by +2.5% with the San Jose MSA at +2.4% and the Sacramento MSA at +2.8%. That is in line with or much higher than a number of other strong markets around the US, including Dallas (+2.8%), Seattle (+2.0%) and New York City (+1.6%).
Of course, the driver in this and most other markets around the US is ‘Tech’, though this is a sector that has become more difficult to define these days. Just take a look at a data source such as PitchBook and all the “industry verticals” that tech encompasses. It just goes on and on and on.
Which takes us to commercial real estate (of course!). Availability of big blocks of office space in San Francisco continues to shrink with little wiggle room for tenants wanting to expand. Currently there are just five blocks of 100,000 square feet or more available with the first of those not move-in ready until next year. There could be more opening up (though not by much) as leases expire and some (tech and non-tech) tenants shrink or decamp to less expensive digs. And there will be additional big blocks eventually as Central SoMa moves forward though those buildings won’t be ready until the mid-2020s. Plus there are a couple of additional options coming up along San Francisco Bay. There is still a strong desire by many to be in this market thanks to the amount of talent based here. In fact, there is around 6.5 million square feet of tenants in the market with almost 60.0% of that being from tech companies (which as mentioned, can be a broad definition).
Several blocks have recently been leased by various tech companies that haven’t even been in San Francisco in any significant way such as Glassdoor (coming in from Marin County) and Sony PlayStation (expanding from the Peninsula). And then you have a company that has decided to buy a building to get the space they require.
At the same time, though, tech isn’t putting its eggs all in one NorCal basket. They are spreading far and wide. Big tech has been at that for a while now – taking space where the talent is or in less expensive markets if that segment of its business makes sense in those markets. Our largest tech company (by employment and square footage) in San Francisco is truly global with its name on a number of buildings these days. And there are plenty of others looking to expand in other markets around the country too. Certainly the cost of living and the cost of doing business is a huge part of that desire to expand elsewhere but so is finding talent (something companies are working harder every day here to do even if that means poaching from one another).
Speaking of cost of living, coliving has definitely become more of “a thing” today, particularly in the more expensive markets around the country. Yes folks, it’s not just about coworking any longer (see our related report on that as well). Longer hours at work and a more congested commute from the suburbs have certainly played into this theme as has the desire to live in more of an urban environment for all age groups. Coliving really isn’t new but more re-imagined. Click here to access our new coliving report.
Related to this topic is a report from CITYLAB this week speaking about the fact that the younger generation won’t necessarily have the desire to move out of the city as past generations have done when they hit a certain age (or get married or have children). And when they do move to what is known as a suburb, well it’s not the 1950s or 1960s version from old movies or where we may have grown up but a more mixed-use walkable transit-oriented one.
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.