|
10/17/24
|
This update was provided by real estate services firm Cushman & Wakefield
San Franciscos office market was a bit of a mixed bag in Q3, according to the most recent San Francsico Office Market Report from Cushman & Wakefield. However, the report suggests more positive office momentum now entering the picture, particularly when dissected by office product type/class and submarket location.
Below are some key highlights from the report:
Tenant demand has now reached its highest point since the pandemic began at 6.3 msf of tenants in the market; 2.2 msf of that within the tech sector. Requirements by size segment skews smaller today, with both tech start-ups and non-tech companies that are searching for space across the city.
New leasing was a bright spot with the year-to-date figure at 4 msf, which was almost the same figure as that for the full year of 2023. If kept on pace, 2024 is likely to be the best year for new leasing since 2019. AI companies certainly have driven large and small leasing activity, though there are other sectors that are active, mostly on a smaller scale, that are a big piece of the equation today. The bullseye for deals was in Class A inventory where 75.2% of new leasing occurred (60.8% of all deals were within the Central Business District).
Top tier (trophy) assets continued to outperform the market as a whole. Tier 1 Class A CBD properties recorded a direct vacancy rate of 8.2% in Q3 2024 and a direct average asking rent of $110.75 psf, which is near the pre-pandemic high.
San Francisco overall vacancy rate continued to rise in Q3 2024, closing at 34.9%, up from 33.5% in Q2 2024 and up from 29.4% one year ago.
The overall average asking rent for San Francisco eased to $67.79 per square foot (psf) on annual gross basis, down 0.9% from the previous quarter and down 5.1% from one year ago. It has fallen 20.0% since reaching its peak of $84.73 psf in Q1 2020. The forecast is for further downward adjustments until late next year.
Sublease vacancy has risen only slightly over the past two quarters it is expected to rise through Q1 2025 though at about the same pace as the previous two quarters.
For 19 straight quarters, net absorption has been negative though there were five submarkets in San Francisco recording positive absorption in Q3 2024.
Layoffs have eased in each of the past three months for the San Francisco MSA (metropolitan statistical area) with some bright spots in the latest data, even within the office jobs categories.
Even though venture capital (VC) funding was lower in Q3 2024 (both at the national and local levels), San Francisco did come out on top. Year-to-date (first three quarters of this year), San Francisco-based companies received $21.3B in VC funding, the highest of any single market. That was followed by greater New York City at $19.8B. Bay Area-based companies took in $49.2B, more than the next six North American markets combined (not including San Francisco, which is included in that Bay Area figure). This does not include the $6.6B funding round for OpenAI which closed in Q4.
|
|
Return to the previous page
|
|
|
|
|