The Small Space Marketplace

List Your Space

Find Space

Home About Us Executive Subscriber Membership RENTV Conferences Newsletter Contact Us Advertise
July 25, 2024
 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 Activity is Slowly Picking Up in 2021


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

Market Drivers

San Francisco office availability rose slightly in the first quarter to 26.9% across all class types. In particular, sublease availability increased to 10.0%, compared to 9.1% in the previous quarter and 4.7% in Q1 2020 for all building class types.

Direct asking lease rates have gradually dropped since the COVID-19 pandemic, reporting an average of $63.35/SF full service. Compared to a year ago, rates have decreased by just over 9%. Class A rates fared better, ending Q1 2021 with an average rate of $72.12/SF full service.

San Francisco office leasing activity stood at 538.3k sf at the end of the first quarter. Total Class A lease activity reached 271.2k sf by quarter-end, with sublease activity reaching 106.9k sf.

Office deliveries are slowly arriving in the San Francisco office market, following a significant decrease in 2020. 420 Taylor St delivered 115.8k sf in the Union Square submarket in Q1, preleased entirely to Nextdoor. However, 2.82 msf of under construction space remains in the market, with several projects scheduled to be completed in 2021, including Hearst’s 5 msf project at 415 Natoma, which is anticipated to deliver 640k sf of prime Class A space in the Yerba Buena submarket in late 2021.

Economic Review

The COVID-19 pandemic in 2020 halted the San Francisco economy, forcing business closures, company layoffs, and remote working. However, by the end of Q1 2021 and with COVID-19 vaccines being distributed in the area, San Francisco entered into orange tier, allowing indoor dining and businesses to open with guidelines in place.

San Francisco unemployment has remained unchanged from Q4 at a rate of 5.7%, while California unemployment has risen to 8.4%.

Near Term Outlook

Office activity in the San Francisco market has picked up in Q1 2021, with both direct and sublease inquiries, primarily from professional service tenants. A few tech companies are hoping to have employees return to the office by the end of 2021, although there is still concern regarding the amount of physical interaction between tenants, making full floors, rather than multi-tenant floors, more attractive.

Given the current market fundamentals, Kidder Mathews still expects a “flight to quality” approach as tenants focus their search on capturing the best spaces at reduced rents.

Market Highlights

• Direct vacancy rates have increased to 11.2%, up 93% YOY.

• Absorption rates have fallen deeper into negative territory, reporting a loss of 2.95 msf by the end of Q1 2021.

• Construction projects remain active, with over 2.82 msf of office developments in the pipeline.

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

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 © 2024 by RENTV, All Rights Reserved
Website designed by Regency Web Services, Inc. and powered by Lightning Media