News & Research Archive

San Francisco Commercial Market is off the Charts

Feb 27, 2013

 

San Francisco launched into 2013 with a head start as 2012 ended in a flurry of activity. Here's a recap of some of the first months achievement and what it means for San Francisco.

Vacancy rates for commercial space continue to drop, with office rates less than seven percent, industrial under five and retail coming in at just under four percent. Office rental rates are leading the way with the tech boom helping to skyrocket over forty percent worth of increases in Class A and B product in less than a year.

Commercial sales have reached record numbers with Class A office projects reaching an average of over $500 a foot, up from $385 a foot in less than a year.

Tech startups are driving the market with new companies forming seemingly overnight. Conventional firms are now feeling the pressure with lease renewals looming at double or even higher rental rates.

Two of the largest real estate companies in the world, CBRE and Cushman & Wakefield, are moving out of their prestigious addresses in favor of once secondary locations.

The stability of this increased economic activity is a question on everyone's minds. With housing prices increasing and dramatic growth in residential markets, businesses are facing a double whammy of increased office rental rates as well as employees seeking higher wages to afford the higher costs of living in a major, economically viable city.

Reminiscent of the dot-com boom of the late 90's, the tech industry's success is embraced and prized while its stability and longevity remain in question. Only time will tell which of these new tech startups will survive the eventual crash and how many traditional businesses will be able to afford the climbing rents to stay in San Francisco.

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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 28 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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