News & Research Archive

Could our Government Downgrade Kill Tech Growth in San Francisco?

Sep 08, 2011

 

San Francisco is enjoying a tech boom not seen since the dot-com boom of 1997-2001. Social networking, mobile applications and gaming firms have quickly absorbed past office vacancies, lowering San Francisco's vacancy from 13% to under 7% in less than a year. Vacancies in South of Market and Potrero Hill have dropped to under 4%. Yet with the growth of these firms depending on the strength of venture capital funding, what will happen to this funding after the recent downgrading of our government rating?

Unlike the dot-com boom where firms had received millions of dollars in up front development funding, most firms in this boom are receiving far less. Venture Capitalists learned from the dot-com boom the importance of having firms prove their potential financial model before investing in serious funding of new startups. This is both good and bad news in regards to whether this tech boom can be sustained in San Francisco.

With limited funding, if the downgrading begins to affect venture capitalists' ability to raise funds from investors, startups may find it difficult to find more investment sources. Without investors, startups will not be able to sustain growth projections or worse yet simply buy themselves enough time to continue existing operations. Compounded with the fact that office rent is rising along with costs associated with securing and keeping quality employees (residential rent) we have the potential for a quick stop to our tech boom.

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Written by: Hans Hansson

E-mail: hans@starboardnet.com


Hans Hansson is President of Starboard TCN Worldwide Real Estate Services as well as a member of the Board of Directors for TCN Worldwide Real Estate. Hans has been an active broker for over 26 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email hans@starboardnet.com or call him at (415) 765-6897. You may also check out his website, http://www.commercialspacefinder.com/.

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