{"id":625,"date":"2011-07-11T12:01:15","date_gmt":"2011-07-11T19:01:15","guid":{"rendered":"http:\/\/www.afirealestate.com\/news\/?p=625"},"modified":"2011-07-11T12:01:15","modified_gmt":"2011-07-11T19:01:15","slug":"san-francisco-office-rents","status":"publish","type":"post","link":"https:\/\/afirealestate.com\/news\/?p=625","title":{"rendered":"San Francisco Office Rents"},"content":{"rendered":"

\"\"<\/a><\/p>\n

Fueled by tech company growth, San Francisco office rents rose sharply in<\/p>\n

the second quarter and vacancies decreased, vaulting the city to the<\/p>\n

leading spot in an otherwise-tepid national office market, according to<\/p>\n

three separate research reports this week.<\/p>\n

\u00a0\u00a0 “San Francisco jumped to the No. 1 position in the country” for office<\/p>\n

real estate performance, said Colin Yasukochi, vice president of research<\/p>\n

at Jones Lang LaSalle and author of one of the reports. “Technology<\/p>\n

companies are the underlying driving force in the San Francisco market.<\/p>\n

It’s recovering very quickly” from the economic downturn.<\/p>\n

\u00a0\u00a0 He shows the city’s average asking office rent at $40.06 per square foot,<\/p>\n

up from $33.71 a year ago.<\/p>\n

\u00a0\u00a0 Over the past four quarters, about 1.3 million square feet of space was<\/p>\n

absorbed by tenants, “the best four quarters since 2008, which was the<\/p>\n

peak of the market,” Yasukochi said. While the vacancy rate overall is<\/p>\n

still a relatively high 16.2 percent, in hot neighborhoods such as South<\/p>\n

of Market, it’s only 6.9 percent, he said.<\/p>\n

\u00a0\u00a0 Chris Macke, senior real estate strategist for research firm CoStar Group<\/p>\n

in Washington, agreed that San Francisco is bouncing back.<\/p>\n

\u00a0\u00a0 “You folks have seen steady rental-rate increases for effectively every<\/p>\n

quarter since early 2010, whereas nationally they’re still having<\/p>\n

rental-rate decreases,” he said. “In the second quarter, San Francisco had<\/p>\n

the largest rental-rate increases, going up 4.4 percent compared to the<\/p>\n

first quarter. That’s very, very strong, far better than anywhere else in<\/p>\n

the country.”<\/p>\n

\u00a0\u00a0 Part of the dynamic is that San Francisco tends to be volatile, as supply<\/p>\n

is constrained for the most sought-after, higher-quality “creative”<\/p>\n

spaces. “It’s a market that is prone to greater increases and decreases;<\/p>\n

it acts like a tightly wound rubber band,” Macke said. Bright outlook<\/p>\n

\u00a0\u00a0 The San Francisco metropolitan area, which includes San Mateo County, was<\/p>\n

also on top for rent increases between the first and second quarter in a<\/p>\n

report from research firm Reis.<\/p>\n

\u00a0\u00a0 “I think the outlook for San Francisco is relatively bright,” said Ryan<\/p>\n

Severino, an economist at Reis. “We expect to see fairly robust rent<\/p>\n

growth there this year.” Both Oakland and San Jose metro areas also are<\/p>\n

benefiting from increased office demand, Reis found. It ranked San Jose<\/p>\n

fourth in the nation for rent increases and the East Bay ninth.<\/p>\n

\u00a0\u00a0 Tech firms increasingly are branching out from SoMa into downtown,<\/p>\n

previously the domain of more traditional companies. ‘The hustle and<\/p>\n

bustle’<\/p>\n

\u00a0\u00a0 “We like the hustle and bustle of the Financial District,” said Alex Mehr,<\/p>\n

co-founder and co-CEO of online dating site Zoosk Inc., which signed a<\/p>\n

lease in the second quarter for 21,391 square feet at 475 Sansome St. It<\/p>\n

already was subletting the space from Yahoo.<\/p>\n

\u00a0\u00a0 “Software companies prefer SoMa because they hire a lot of Java developers<\/p>\n

who live in the South Bay and so (being near) Caltrain is an advantage,”<\/p>\n

Mehr said. “But we’re a Web company and our developers live in San<\/p>\n

Francisco, so the Financial District is a much easier commute for them.”<\/p>\n

\u00a0\u00a0 Zoosk went from about 20 employees 18 months ago to almost 90 now. Mehr<\/p>\n

expects the staff to double annually, so the company will soon outgrow its<\/p>\n

current location. Rising rents don’t concern him too much. In the heart of<\/p>\n

the city<\/p>\n

\u00a0\u00a0 “The advantage of being in the heart of San Francisco with quick access to<\/p>\n

BART and having all that action all around us outweighs any increase in<\/p>\n

prices,” he said.<\/p>\n

\u00a0\u00a0 Meade Boutwell, senior vice president with broker CB Richard Ellis,<\/p>\n

recently represented a downtown building that remodeled a<\/p>\n

3,000-square-foot space specifically to lure tech tenants.<\/p>\n

\u00a0\u00a0 “The Mills Building at 220 Montgomery is one of the oldest buildings<\/p>\n

downtown, it’s a classic that survived the 1906 earthquake,” he said.<\/p>\n

“It’s class B space with traditional dropped ceilings. We tore out the<\/p>\n

ceilings, exposed the raw concrete, brick and piping, which made it very<\/p>\n

creative-looking. The tech tenants that all wanted SoMa in 2000 said they<\/p>\n

loved the feeling of the space; we had nine offers.” A tech company leased<\/p>\n

the space for $41 per square foot, a premium from its $35 asking price.<\/p>\n

Now the owner plans to do a similar rehab elsewhere in the building.<\/p>\n

\u00a0\u00a0 Executives at Starwood Property Trust, a real estate investment trust<\/p>\n

based in San Francisco, said they are bullish on the city.<\/p>\n

\u00a0\u00a0 “San Francisco has held up better than most markets,” said Chris Tokarski,<\/p>\n

managing director and chief credit officer. “In particular the tech growth<\/p>\n

is creating more pressure and space is leasing up quicker. You can say<\/p>\n

that about apartments, retail and office. It clearly is seeing growth on<\/p>\n

all fronts.”<\/p>\n

Original article via The San Francisco Chronicle<\/a><\/p>\n

E-mail Carolyn Said at csaid@sfchronicle.com<\/a>. ———————————————————————-
\nCopyright 2011 SF Chronicle<\/wbr><\/wbr><\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Fueled by tech company growth, San Francisco office rents rose sharply in the second quarter and vacancies decreased, vaulting the city to the leading spot in an otherwise-tepid national office market, according to three separate research reports this week. \u00a0\u00a0 “San Francisco jumped to the No. 1 position in the country” for office real estate […]<\/p>\n","protected":false},"author":19,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-625","post","type-post","status-publish","format-standard","hentry","category-real-estate-news"],"_links":{"self":[{"href":"https:\/\/afirealestate.com\/news\/index.php?rest_route=\/wp\/v2\/posts\/625","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/afirealestate.com\/news\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/afirealestate.com\/news\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/afirealestate.com\/news\/index.php?rest_route=\/wp\/v2\/users\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/afirealestate.com\/news\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=625"}],"version-history":[{"count":0,"href":"https:\/\/afirealestate.com\/news\/index.php?rest_route=\/wp\/v2\/posts\/625\/revisions"}],"wp:attachment":[{"href":"https:\/\/afirealestate.com\/news\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=625"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/afirealestate.com\/news\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=625"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/afirealestate.com\/news\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=625"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}