The Small Space Marketplace

List Your Space

Find Space

Home About Us Executive Subscriber Membership RENTV Conferences Newsletter Contact Us Advertise
May 31, 2023
 Search RENTV
 The REview
News Home Page
Southern California
Northern California
Pacific Northwest
Prop. Management
Press Releases
 R. E. Marketplace
Service Providers
Property Spotlight
 RENTV  Conferences
Subscriber Login:
Forgot Password?

Printer-friendly Version   Email an Associate
San Francisco Office Market Review for Year-End 2019


This report was provided by real estate services firm Kidder Mathews

The San Francisco office market continues to reach new heights, as strong tenant demand remains active in one of the nation’s strongest markets. Just over 3.3 msf of office space is currently under construction, of which 46% is pre-leased, demonstrating the tight status of the market. Rental rates remain on an upward trajectory, averaging $65.87/sf full service across all office building classes and submarkets, up 6% from the prior year. Sale activity soared to $10.1 bil this year, as institutional capital continues to pour into San Francisco.

New Construction

Four office properties were delivered in San Francisco within the past year, adding roughly 1.8 msf to the office inventory. The largest project completed was Park Tower at Transbay, a 765k sf building located at 250 Howard St. Social media giant Facebook is the sole office tenant at the property. Next, Kilroy Realty delivered The Exchange, a 750.4k sf, Class A office building leased to Dropbox in the Mission Bay submarket. Pacific Medical Buildings wrapped up construction on their medical office building at 1100 Van Ness Ave, with Sutter Health occupying around 117k sf across five floors. Lastly, 735 Bryant Street completed its full renovation and currently has 19.5k sf available for lease.

Approximately 3.3 msf remains under construction, of which 46% is fully pre-leased. Among the projects in the development pipeline, the largest is Oceanwide’s First Street Tower, a massive 1.2 msf office tower located in the South Financial District. Developer Oceanwide Holdings halted construction in late 2019 on the residential portion of their project, however work will continue on the office tower. Several projects are expected to wrap up in 2020, such as Uber’s new headquarters in the Mission Bay submarket. The ride-hailing company is set to move into over 1 msf of high-quality Class A space in Q2 2020. Meanwhile, 633 Folsom Street, pre-leased entirely to Asana Inc, will add 268k sf to the Rincon/South Beach office inventory in Q3 of next year.

Asking Rental Rates

Persistent and steady tenant demand have caused rental rates to remain on an upward climb, averaging $65.87/sf full service at the end of 2019. This represents a 6% increase from the prior year. The Financial District holds the highest direct asking rate, averaging $74.20/sf full service, followed closely behind by the Rincon/South Beach submarket at $73.25/sf full service. In particular, Class A direct rates in all submarkets averaged $80.92/sf full service, up 14% year-over-year (YOY). Class B and C rates are also steadily rising.

Leasing Activity & Absorption

Leasing activity slowed down in 2019, posting just over 9.89 msf. Compared to 2018, activity fell by 33%. The Financial and South Financial District were the dominant submarkets of this year, with a combined leasing activity of 6.27 msf. Pinterest completed the largest lease of the year by agreeing to 490k sf at Alexandria Real Estate Equities’ approved 88 Bluxome Street project in SoMa. Also of note was Visa’s lease for the entire 13-story, 300k sf office property at Mission Rock, a new development in the Mission Bay submarket that is scheduled to break ground in 2020. Lastly, Asana Inc signed a 268k sf lease at the under construction development at 633 Folsom Street and is set to move in by mid-2020.

The San Francisco office market ended the past year with a gain of 2.3 msf of direct net absorption, down from 2018’s net absorption high of 4.4 msf. The South Financial District welcomed 1.2 msf of absorption gains in 2019, largely due to Facebook moving into 765k sf at Park Tower and Google entering into their 310k sf space at 1 Market Street. The Mission Bay/China Basin submarket reported nearly 750k sf of positive net absorption this year, brought on by Dropbox moving into The Exchange at 1800 Owens Street.

Direct vacancy rates arrived at 3.9%, falling 50 basis points from 2018. The Van Ness Corridor posted the highest vacancy at 10%. Class A spaces in all submarkets ended 2019 with a low 3.4% vacancy rate. Meanwhile, market-wide availability climbed up to 9.6%, up 90 basis points YOY. This is partially due to Uber placing up to 730k sf of office space for sublease at their multiple locations spread out between the South Financial District and MidMarket areas. Union Square recorded the highest availability rate at 14.1% by year-end.


Sale volume reached a record high in 2019, ending the past year at $10.1 bil. The average price per square foot was $830, while cap rates averaged 4.4%. The largest sale of the year, and one of the largest in San Francisco history, was Jamestown’s purchase of Levi’s Plaza for $826 mil, or $888/sf. The office portfolio totals close to 930k sf, with anchor tenant Levi Strauss & Co. occupying the space until 2022. Next, Paramount Group purchased from The Blackstone Group two adjacent office towers at 555 and 575 Market St for $722 mil, or $959/sf. Lastly, Beacon Capital Partners agreed to acquire 650 Townsend Street for $602 mil, or $899/sf. The seller, social game developer Zynga, agreed to leaseback 185k sf of office space for the next 12 years.


The Central SoMa plan is a monumental development plan in the growing SoMa neighborhood, focused on the area between 2nd and 6th Street and from Howard to Townsend Street. Approved in late 2018, the plan allows up to 8,800 residential units, of which 33% is affordable housing, and office space to supply nearly 32,000 jobs. In addition, over $600 mil will go towards improving transportation services, including updated pedestrian, bicycle, and transit areas. Several large development projects are within the Central SoMa plan, including Kilroy Realty’s Flower Mart site, a 2.2 msf mixed-use projected scheduled to arrive in 2024 and Tishman Speyer’s 960-unit mixed-use development on the former Gilt Edge Creamery site across from the main Caltrain station at 4th & Townsend.

2019 Market Highlights

Direct Vacancy fell 50 basis points YOY to 3.9%
Rental Rates average $65.87/sf full service
Sales Activity ended 2019 at a high $10.1 bil

Sources: CoStar, San Francisco Business Times, San Francisco Planning

Return to the Archive 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 © 2023 by RENTV, All Rights Reserved
Website designed by Regency Web Services, Inc. and powered by Lightning Media