The Small Space Marketplace

List Your Space

Find Space

Home About Us Executive Subscriber Membership RENTV Conferences Newsletter Contact Us Advertise
October 27, 2021
 Search RENTV
   Go!
 The REview
 News
News Home Page
Southern California
Northern California
Pacific Northwest
Texas/Southwest
Retail
Multifamily
Financing
Prop. Management
Archives
Press Releases
 R. E. Marketplace
Service Providers
JobWorks
Property Spotlight
 RENTV  Conferences
Subscriber Login:
  
Email      
    Go!
Password      
Forgot Password?



WHAT'S NEW
Printer-friendly Version   Email an Associate
San Francisco Office Market Expected to Pick Up

10/14/21

This report was provided by Kidder Mathews Director of Research Gary Baragona

Emerging office market fundamentals suggest that recovery is just around the corner for San Francisco’s office market, according to third quarter 2021 data from Kidder Mathews. Here is a summary of their latest research:

MARKET DRIVERS

• After a year of historically low leasing activity between mid-2020 and mid-2021, total leasing activity averaged more than 1.8 msf per quarter over the past two quarters including 1.6 msf in 3Q 2021. Year-to-date leasing activity totals 4.2 msf, already higher than last year’s historically low annual total of 3.7 msf.
• However, many firms are continuing to “rebalance” their office footprint with some still giving back space. This caused a slight uptick in the overall vacancy rate, rising from 18.6% in 2Q 2021 to 18.9% in 3Q 2021.
• There is a continued flight to quality from most tenants as smaller, older buildings in tougher locations are not getting much attention or tour activity
• Sublease vacancy decreased during the quarter to 5.7%, illustrating the solid demand for well-priced, plug-and-play opportunities. Additionally, leasing activity within sublease space totaled 761.7k sf during the quarter, accounting for approximately 46% of the total leasing activity in 3Q 2021.
• The average asking direct lease rate has been steadily dropping since the beginning of the pandemic, falling nearly 15% from the peak in 1Q 2020. However, rents only dropped 0.1% in 3Q 2021 as the market continues to show signs of recovery, ending the quarter at $62.45/sf full service.
• Two properties were delivered in 3Q 2021 totaling 169.4k sf, both occurred in the Showplace Square submarket. Additionally, 1.9 msf is currently under construction, the largest being Hearst’s 5M project at 415 Natoma St, which is scheduled to deliver 64k sf of prime Class A space in the Yerba Buena submarket by late 2021.

ECONOMIC REVIEW

• Many companies delayed their fall plans to return to the office due to the Delta variant, forcing the office market to press the pause button while firms find the optimal balance between on-site, remote work and hybrid work models.
• The unemployment rate in San Francisco is currently at 5.6%. While this rate is slightly higher than 5.5% just three months ago, it is significantly lower than 9.8% at the same time last year.

NEAR TERM OUTLOOK

• The San Francisco office market is showing signs of life and is expected to turn the corner in early 2022 as companies and their employees begin to return to work and begin to reenergize the city.
• Largely due to the multiple delays from the recent pandemic spikes, tour activity remains relatively slow with many of the active tenants are the same tenants who toured 3 months ago, 6 months ago and 9 months ago.

MARKET HIGHLIGHTS

• The overall vacancy rate increased 55% year-over-year, ending 3Q 2021 at 18.9%.
• Year-to-date net absorption totaled negative 3.5 msf through the first three quarters of 2021.
• Development remains active with over 1.9 msf of under construction projects.

Sources: State of California Employment Development Department, CoStar,
Kidder Mathews Research




Return to the previous page


 


 


 


 
 



Home | About Us | Newsletter | Contact Us | Executive Subscriber Membership | Executive Subscriber Home | Advertise
Southern California | Northern California | Pacific Northwest | Southwest | Retail | Multifamily | Financing | Property Management
Archives | Press Releases | Service Providers | JobWorks | Property Listings

Copyright © 2021 by RENTV, All Rights Reserved
Website designed by Regency Web Services, Inc. and powered by Lightning Media