San Francisco office rents in the last quarter rocketed right off the charts, moving fastest South of Market where tech companies like to cluster but also seeping into neighboring submarkets.
See the Grubb & Ellis Office Market Report for more official details.
*Net positive absorption hit somewhere around 1,000,000 SF–the number changes company to company depending on whether or not the research department counts a deal when signed or when the tenant occupies. Grubb & Ellis counts when the company occupies.
So our numbers would not include the Twitter deal until the company occupies its new space. However, at 210,000 SF, I have to mention the deal now: it is large; it is a relocation and an expansion (renewals make up most of the headline-catching big deals, as you will see below); and it certainly shut a lot of people up who have been poo-pooing the company’s importance when Shorenstein signed the lease. It is a very significant transaction, and the ripples being created as it energizes the dreary mid-Market area will be exciting to watch and participate in.
*San Francisco unemployment dropped to 8.4% in May’s statistics.
*Vacancy overall dropped at least 40 basis points to around 16%, which pushed asking rates up 6-10% in Class A and B properties. In some buildings, ownership pushed rents up 10-12% over a couple of months, and there are examples that exceed even those numbers. Class A buildings are –loosely– in the mid $30′s to low $40′s FS range and B buildngs are low $30′s to mid $30′s. In a quickly moving market like this, it is almost impossible to measure accurately. By the time you quote a number, it’s gone up. Tenants and owners alike are both pretty much in shock at how fast everything is changing.
Top Transactions of the Quarter:
*EPA renewal at 75 Hawthorne, 285K SF
*Twitter to 1355 Market for 210K SF
*Farallon Capital Management renewal at One Maritime, 176K SF
*Farella, Braun, & Martel renewal at 235 Montgomery
*PG&E renewed at One Market, 78K SF
*Idle Games, new lease at 875 Howard for 33K SF
As I write today’s post, the Dow has dropped 500 points. So in spite of the economic moat that is San Francisco, unsettling events like this are making me very, very uneasy.
