By Robert Sammons, Senior Director, Northern California Research
It seems as if tenants can’t get enough of San Francisco. New office deliveries at 100 percent pre-leased as well as activity from tech and non-tech alike in other buildings across the City pushed the vacancy rate down to its lowest figure in two years. San Francisco is now left with just 13 space options of 100,000 square feet or more through 2019 yet there are 24 requirements in that size range. Several of the major blocks that are available are likely to be leased before the end of the year. There are deliveries scheduled for 2019 though those are also fully pre-leased. An additional two buildings are under construction yet not expecting to deliver until 2020 and 2023. And then there’s the large swath of the City known as Central SoMa where the redevelopment plan was approved by the Planning Commission and awaits final approval by the Board of Supervisors and the Mayor expected this month. If all that goes perfectly, major projects still would likely not be up and open until the mid-2020s. Developers with sites there are queued up for the remaining allocation under Prop M (close to 3.0 million square feet after the additional 875,000 square foot annual allocation that will be added on the 17th of the month) so the limited square footage allowance will keep development tempered in any case.
All this activity (or non-activity) translates to rising rents. On a nominal basis, San Francisco is at record levels bypassing the figures recorded during the dot-com boom of 1999 and 2000 though if adjusted for inflation we are still below the peak set in the fourth quarter of 2000. For more on all of this, take a look at our Six Quick Stats infographic on San Francisco.
And here are some even quicker stats featured:
Office using positions grew by 3.6% year-over-year to close at 452,400 in August;
CBD Class A direct asking rents averaged $81.25 psf;
New leasing activity totaled 1.6 msf;
Citywide vacancy has fallen to 6.8% while CBD Class A direct vacancy was 6.4%;
New construction deliveries totaled 2.8 msf though Q3 2018;
Overall net absorption climbed to a record high of 4.5 msf YTD.
Again, check out our Six Quick Stats infographic for the full quick scoop on San Francisco, including our Looking Ahead view.
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.