Category: San Francisco Commercial Real Estate News (206)


The San Francisco Industrial market ended the third quarter 2014 with a vacancy rate of 4.5%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (82,427) square feet in the third quarter. Vacant sublease space decreased in the quarter, ending the quarter at 305,115 square feet. Rental rates ended the third quarter at $15.29, an increase over the previous quarter. There were no properties under construction at the end of the quarter.

Net absorption for the overall San Francisco Industrial market was negative (82,427) square feet in the third quarter
2014. That compares to positive 957,648 square feet in the second quarter 2014, positive 88,854 square feet in the first quarter 2014, and positive 493,540 square feet in the fourth quarter 2013.

Tenants moving out of large blocks of space in 2014 include: FedEx moving out of (60,100) square feet at 200
Littlefield Ave, Vitasoy moving out of (52,500) square feet at
584 Eccles Ave, and KaloBios Pharmaceuticals moving out of
(49,351) square feet at 260 E Grand Ave.

Tenants moving into large blocks of space in 2014 include: Formations Brands moving into 120,000 square feet at 530
Forbes Blvd, LeeMah Properties, Inc. moving into 87,000 square feet at 155 S Hill Dr, and Stitch Fix moving into 80,000 square feet at 245 S Spruce Ave.

The Flex building market recorded net absorption of posi- tive 36,585 square feet in the third quarter 2014, compared to positive 299,408 square feet in the second quarter 2014, negative (50,744) in the first quarter 2014, and positive 73,956 in the fourth quarter 2013.
The Warehouse building market recorded net absorption of negative (119,012) square feet in the third quarter 2014 com- pared to positive 658,240 square feet in the second quarter 2014, positive 139,598 in the first quarter 2014, and positive 419,584 in the fourth quarter 2013.

The Industrial vacancy rate in the San Francisco market arean increased to 4.5% at the end of the third quarter 2014. The vacancy rate was 4.4% at the end of the second quarter 2014, 6.0% at the end of the first quarter 2014, and 6.1% at the end of the fourth quarter 2013.

Flex projects reported a vacancy rate of 5.9% at the end of the third quarter 2014, 6.1% at the end of the second quarter
2014, 9.3% at the end of the first quarter 2014, and 9.1% at the end of the fourth quarter 2013.

Warehouse projects reported a vacancy rate of 4.0% at the end of the third quarter 2014, 3.9% at the end of second quarter 2014, 4.8% at the end of the first quarter 2014, and 5.1% at the end of the fourth quarter 2013.

Rental Rates
The average quoted asking rental rate for available Industrial space was $15.29 per square foot per year at the end of the third quarter 2014 in the San Francisco market area. This represented a 2.1% increase in quoted rental rates from the end of the second quarter 2014, when rents were reported at $14.97 per square foot.

The average quoted rate within the Flex sector was $24.66 per square foot at the end of the third quarter 2014, while Warehouse rates stood at $11.64. At the end of the sec- ond quarter 2014, Flex rates were $23.85 per square foot, and Warehouse rates were $11.26.

Total Industrial inventory in the San Francisco market area amounted to 95,118,337 square feet in 4,848 buildings as of the end of the third quarter 2014. The Flex sector consisted of 23,921,073 square feet in 790 projects. The Warehouse sector consisted of 71,197,264 square feet in 4,058 buildings. Within the Industrial market there were 511 owner-occupied buildings accounting for 12,334,611 square feet of Industrial space.

Sales Activity
Tallying industrial building sales of 15,000 square feet or larger, San Francisco industrial sales figures fell during the second quarter 2014 in terms of dollar volume compared to the first quarter of 2014.

In the second quarter, 20 industrial transactions closed with a total volume of $109,016,000. The 20 buildings totaled 558,793 square feet and the average price per square foot equated to $195.09 per square foot. That compares to seven transactions totaling $153,598,100 in the first quarter. The total square footage was 667,191 for an average price per square foot of $230.22.

Total year-to-date industrial building sales activity in 2014 is up compared to the previous year. In the first six months of 2014, the market saw 27 industrial sales transactions with a total volume of $262,614,100. The price per square foot has averaged $214.21 this year. In the first six months of 2013, the market posted 14 transactions with a total volume of $86,969,600. The price per square foot averaged $168.65.

Cap rates have been higher in 2014, averaging 6.70%, compared to the first six months of last year when they averaged 6.04%. One of the largest transactions that occurred within the last four quarters in the San Francisco market is the sale of 268-298 Alabama St in San Francisco. Totaling 34,545 square feet, the two industrial buildings sold for $20,000,000, or $578.95 per square foot. The property sold on 5/22/2014 and will be occupied by the buyer, Dandelion Chocolate.

Calco Commercial represented the Owner in the sale of 238 Capp Street in the Mission District this week. 238 Capp is a 7,874+/-square foot two-story building with ground floor warehouse and second floor offices. The warehouse area is clearspan with 15′ ceilings and one (1) drive-in door. The second story offices include hardwood floors & high ceilings.

If you have questions about our other available commercial listings, or Bay Area real estate market conditions, call our office at 415.970.0000.

Capp Office Space Rental (9) Sml_forweb

Capp Office Space Rental (30) Sml_for web

238 Capp_Warehouse1_for Web

238 Capp (5) Sml_forWeb

Source: CoStar News
By Randyl Drummer
October 8, 2014

U.S. office construction has reached its highest level since 2008 as developers break ground on new projects in a growing number of markets where job growth, rising rents and falling vacancies are finally justifying new development.

An analysis of CoStar Analytics data shows about 86 million square feet of higher-end office properties larger than 50,000 square feet under construction, a 25.7% increase compared to 2013’s 68.5 million square feet and the highest total since the end of 2008, when 105.7 million square feet of new office space was under construction.

This total amount under consturction for the year is likely to rise even higher as CoStar researchers discover more new projects breaking ground before the end of 2014.

CoStar expects 44.5 million square feet of office project deliveries by the end of 2014 — a 22% increase over 2013. New office construction starts, meanwhile, stood at 42.6 million square feet as of Sept. 30, already exceeding last year’s total, ensuring a steady supply of new product through early 2017.

“Developers are hustling now to get new product to the market, given the stronger absorption trends, particularly for newer, high-quality space,” explained Cassidy Turley Chief Economist Kevin Thorpe. “But it will take a couple of years for all of this new development to materialize, meaning demand will continue to outstrip supply, which will keep upward pressure on rents.”

Editor’s note: For a comprehensive look at the U.S. office market, register for the CoStar State of the Office Market Third-Quarter 2014 Review & Forecast on Oct. 21. CoStar subscribers may log on and click the Knowledge Center tab.

John Sikaitis, managing director of U.S. office market research for JLL, believes that managing the development pipeline will become the biggest challenge for the office market, especially in hot construction markets like Texas and the San Francisco Bay Area.

He points out that office development has shifted from being largely focused on build-to-suits to now primarily multi-tenant construction, which has lower 50% to 60% pre-leasing rates, versus a 100% pre-leasing rate on build-to-suit developments. While that signifies improving sentiment in both the office sector and the overall economy, it also foreshadows the oversupply issues from past cycles.

“A lot of developers now are thinking about breaking ground on that next project, and we could be in that same exact situation 36 months from now that we were in during 2009 and 2010,” Sikaitis said. “We really need to pause and think about the momentum in the market, and if it’s sustainable with this new development.”

Case To Be Made for Market Equilibrium
For now, analysts say, the good news is that strong leasing activity is more than offsetting concerns about potential oversupply. Only 45% of space under construction remains available, with large blocks taken by tech, creative and energy companies such as, Comcast, ConocoPhillips, Google, State Farm and LinkedIn.

Walter Page, CoStar Portfolio Strategy director of research, office, said the U.S. is on pace for office tenants to take 77 million square feet of office space in 2014 — a 77% increase over 2013 — followed by another 90 million square feet in 2015 and 2016.

The vacancy rate will trend down to a projected low of about 11% in 2016 as shadow space evaporates and office job growth continues to rise. In the improving economy, even the rate of decline for average space per employee has slowed from 2% to 1%.

“We have significant less supply than demand, which will allow vacancy rates to continue to move down until 2017,” Page said.

“The office market recovery is at its best point of the past seven or eight years. We experienced more occupancy gains in the third quarter than so far in the recovery,” Sikaitis added.

Preliminary CoStar data shows that net new office supply of 23.5 million square feet nearly caught up with demand of 24.9 million square feet in the third quarter. But that’s not likely to last, with absorption expected to remain north of 30 million square feet per quarter through late 2016.

By that time rent growth is expected to slow, as many of the new office developments now under construction enter the market, such as Hines’ 48-story tower at 609 Main Street in Houston, Hanjin Group’s 73-story, 1.7 million-square-foot Wilshire Grand Tower in downtown Los Angeles, and towers in North Riverside Plaza and 444 W. Lake Street in Chicago.

Mid-size projects beginning in the current quarter and early 2015 will reach the market in late 2016 early 2017 at the same time.

“We’re going to see a pickup in construction, which will ultimately weigh on fundamentals,” said CoStar Portfolio Strategy real estate economist Sam Tenenbaum.

Tenenbaum recommends that investors start thinking about developing in secondary and tertiary markets such as Portland, Minneapolis, Denver and Nashville, where demand has been fairly strong, vacancies have tightened, and pricing has picked up substantially, especially for newer office buildings built since 2008.

Ultimately, however, the usual host of economic wildcards will determine how much office space gets built.

“Prevailing macroeconomic factors, lenders’ willingness to start projects on a speculative basis, rising construction costs and the rise and fall of interest rates will determine how much of the pipeline will begin construction sooner rather than later,” JLL’s Sikaitis said.


Source: The Registry Bay Area Real Estate
Author: Nancy Amdur

San Francisco office sales are reaching near historic levels in 2014, mainly due to fast-growing technology companies and limited supply, real estate analysts said.

Office sales in the city are on track to hit $6.7 billion this year, the second highest volume total in history, according to a report by commercial real estate services firm CBRE Group, Inc. Further, the average price per square foot for Class A office space is at a record high of $648.

“San Francisco is one of the hottest investment markets in the country, and it’s garnering the attention of investors all over the world,” said Colin Yasukochi, the director of research and analysis at CBRE in San Francisco.

“The primary driver of the office market is the technology-driven economy that has created a tremendous amount of demand for office space here in San Francisco, and it’s increasing the rents, which increases the income potential of properties and attracts investors,” Yasukochi said.

Foreign investors, pension funds and other institutional investors are among the players in the market, real estate analysts said.

“[Investors] are looking to put money into a market where they see their income potential continue to grow over the long term,” Yasukochi said.

“There is a lot of money looking for prime assets in gateway cities and San Francisco, given the strong leasing and the strong rent and the strong rent projections, will continue to attract capital,” said Caroline Rooney, the managing director for capital markets at real estate brokerage Cushman & Wakefield in San Francisco.

San Francisco’s office market has been on the upswing since 2011, but the highest sales volume was in 2007, with $9 billion. That was mainly attributed to the sale of Equity Office Properties Trust’s portfolio, Yasukochi said.

The largest transaction so far this year was New York-based Blackstone Real Estate Partners’ $550 million purchase of a 49 percent stake in One Market Plaza, he said. Morgan Stanley Real Estate sold it for approximately $750 per square foot. New York real estate investment firm Paramount Group, Inc. is the majority owner of the 1.6 million-square-foot property.

Last month, a joint venture of Norway-based Norges Bank Investment Management and New York pension fund TIAA-CREF paid $390 million, or roughly $748 per square foot, for 405 Howard St. GE Real Estate and Langley Investment Properties sold the 521,000-square-foot property.

Also in September, Paramount Group paid $395 million for 50 Beale St. The firm bought the 662,000-square-foot skyscraper for about $596 per square foot from Rockefeller Group Investment Management Corp., on behalf of a joint venture of Rockefeller Group U.S. Premier Office Fund LP and Mitsubishi Estate New York.

“[This building] is the type of iconic asset where we believe we can utilize our operational expertise to attract and retain a premium tenant base and enhance cash flow over time,” said Paramount President and CEO Albert Behler in a statement.

“People want to be in San Francisco,” said Ben Thypin, the director of market analysis at New York-based global research firm Real Capital Analytics. “Demand from tenants and employees, but also competition from investors are driving this activity.”

Indeed, businesses seem to covet a San Francisco address. With 7.6 million square feet of city office space leased through the third quarter this year, the amount already surpassed the previous full-year leasing record of 7.4 million square feet, set during the dot-com boom in 1999, said Robert Sammons, a San Francisco-based regional research director at Cushman & Wakefield. Vacancy for Class A space in the city totaled 7.9 percent through the third quarter this year, he said.

Technology companies, such as Salesforce, Google, LinkedIn and Uber, took much of the space. Competition for space is helping to boost rents, but prices are not peaking, Sammons said. The average rent per square foot for Class A office space citywide is $61.38, and in 1999 it was $75.24.

San Francisco led the nation in rent growth in the first half of this year, according to a Real Capital Analytics report, and prices may jump at least 20 percent over the next three or four years, Rooney said.

Rising prices may push demand to neighboring markets.

“This cannot continue forever. It’s likely that this demand will eventually spill over into the East Bay and the South Bay” where space might be less expensive, Thypin said.

For now, demand is expected to continue as tech firms seek to attract employees with city space, analysts said. Also, new supply is limited, in part by Proposition M, which caps the amount of San Francisco office space that can be built annually.

“What [investors] are pursuing is a market that has strong growth and a continued appetite for office space,” Yasukochi said. “It’s a market that is becoming even more supply constrained as we run up against the limit on how much new development can occur in the city. Investors see the market as having strong upside potential.”


Source: The Registry Bay Area Real Estate
Author: Jon Peterson

On the heels of large development announcements and purchases in Redwood City, San Mateo now seems poised to capture the attention of the development world as it unveils a new large development in the middle of the hot Peninsula submarket.

Philadelphia-based EBL&S Development is planning the development of Station Park Green, a mixed-use apartment, office and retail development in San Mateo located at 1700 and 1790 South Delaware Street.

The large development showcases the opportunity this market has to offer as one of Bay Area’s best connected towns. “I would think that this project will have a total development cost somewhere in the range of $250 million to $300 million,” says Alan Talansky, a vice president of development for EBL&S. He works out of the company’s regional office located in San Mateo at 30 West Poplar Avenue.

The developer is now going through a design review stage but anticipates the project to kick off shortly. “We should be able to start the project sometime during the first quarter of next year,” said Talansky.

This project was first brought up for approval in 2011. It was then put on hold by the developer due to the financial circumstances brought on by the Great Recession. All the while, the developer anticipated a time when the market would recover and allow the development to commence.

EBL&S has been given the okay by the city to construct 599 apartmens, 10,000 to 15,000 square feet of commercial space, 25,000 to 30,000 square feet of retail and 2.3 acres of parks.

It’s anticipated that the first part of the development will be with the housing. “I would think that the initial part of the development will be with around half of the apartment units constructed,” said Talansky.

The vast majority of the apartments will be market-rate units. In terms of the affordable development, the project is planning to have either 15 percent affordable units, or 10 percent will be considered as low-income units. Most of the apartment units are planned to be one-bedrooms. This kind of housing should attract either single and/or young professional working couples and empty-nesters. The project will have only five three-bedroom units, which is something that the city of San Mateo had requested.

EBL&S estimates that employees of nearby companies should be attracted to the apartment portion of the development. “I believe that the employees located in the nearly 300,000 square feet 400-450 Concar office project owned by Hines located across the street and other close by office buildings should be attracted to the housing that we will be providing,” said Talansky.

Station Park Green is a transit oriented development. There will be a Caltrain stop located in the development. This will allow apartment renters to commute either to the north or south. This project has been selected as one of the first LEED-ND projects to attain Gold status.

The retail planned for the development will feature a neighborhood retail theme. This will serve the existing customers already living in the area and the new renters of the apartment project. One amenity planned for the apartments is to have six car-sharing spaces for its renters to use.

EBL&S is unsure at this time what the ownership structure of the project will be in the future. There is a possibility that traditional construction financing could be used on the project. There also is a chance that some institutional partners might be brought into the project. This could be a REIT or a private equity real estate fund.

EBL&S owns two other properties in the San Francisco Bay Area, according to its Web site. This is the Sun Microsystems Building located at 2525 North First Street in San Jose and Kmart Plaza at 1700 South Delaware in San Mateo.

San Mateo Planning Massive $250MM to $300MM Mixed-Use Development

Source: San Francisco Business Times
Author: Adam Weintraub

These are exciting times to be a manufacturer in San Francisco. But nerve-wracking, too.

With the rise of the ‘maker’ movement and rebirth of artisan food and drink, manufacturing firms and jobs in the city are burgeoning after several decades of decline.
That growth is creating its own problems: It’s driving up rents and increasing competition for space from tenants that can pay more than a low-margin manufacturer. Rents have surged in the last two years, and rich sale prices for industrial sites suggest that new owners will charge rents too high for the mainly small firms behind San Francisco’s manufacturing rebirth.
Even the city’s recent effort to create incentives for construction of more light-industrial space — by allowing developers to combine it with office development — faces looming clouds. With the first combined office/industrial project under the new rules getting ready to face the Planning Commission, officials worry that a flood of office development proposals will quickly hit the Prop. M development ceiling.

“We remain very concerned about how tight the market is right now for industrially zoned space,” said Kate Sofis, executive director of SFMade, a nonprofit supporting the manufacturing sector and companies in the city. “We’re seeing asking rents nudge up above $2 a square foot (per month), which is very difficult for a traditional manufacturer.”

Bidding wars
Dave McLean started searching in 2010 for a larger space to produce beer for his Magnolia Brewing Co., which had maxed out capacity in the basement of his Haight-Ashbury brewpub. He found about 10,000 square feet in one of the few available spaces at the American Industrial Center at 2505 Third St. in Dogpatch. He opened the brewery late last year and Smokestack BBQ restaurant in May.

“I suspect the window may have shut right as we got in,” said McLean, who calls the giant AIC complex with its hundreds of small spaces a unique asset in San Francisco’s manufacturing world. “I don’t think I’d want to be looking right now.”

The space crunch has bakers and chocolatiers competing for space with repair shops and HVAC distributors, and now also with small clothing manufacturers, 3D-printer developers and robotics startups. Some firms are struggling with bootstrap finances while others are backed by investors, and there can be a big difference between the profit margins on a robotic manipulator and a barrel of beer.

That sets up bidding wars for so-called “PDR” space (for “production, distribution and repair”) just as it does for offices, with high-margin or well-financed tenants squeezing out those with weaker cash flow.

“It’s certainly getting to the point price-wise where a lot of business services (companies) are having a tough time making rent,” said Scott Mason, president of Calco Commercial Inc., a real estate brokerage firm with extensive experience in San Francisco industrial property from SoMa to the Bayshore.
“There is a shortage right now; rents are up 30 to 40 percent just in the past two years or so,” said David Lai, a principal with Yosemite Investment LLC, of South San Francisco. The company develops and runs industrial space, including at Yosemite Plaza, a former bottling plant in the Bayview where tenants have included a tech accelerator, a commercial kitchen, a chocolate maker and a towing firm.

Now Yosemite is looking to replace a 1,200-square-foot storage building and surface parking at 2200 to 2250 Jennings St. with a 13,500-square-foot industrial building, 26 feet high, which could be divided into six individual spaces for lease or sale, according to preliminary plans filed with the city. “There is a lot of demand for small spaces,” Lai said.
Rising demand and prices have attracted some investor interest. ASB Real Estate Investments, in a joint venture with SKS Partners and ProspectHill Group, said in July it would buy the 103,000-square-foot office-warehouse complex at 1400 16th St. in Showplace Square that’s been the headquarters of Jessica McClintock Inc. SKS declined to comment, but the buyers have said they intend to redevelop the three-building complex for R&D, prototyping and manufacturing.
SFMade chief Sofis said the word in the marketplace is that the price was high enough that she’s expecting rents in the neighborhood of $2 to $3 per square foot per month. “That’s not an ideal outcome from the standpoint of SFMade,” she said.

San Francisco’s strategy toward PDR space has its roots about 15 years ago, when the dot-com boom raised the same kinds of concerns heard today that residential and office development would crowd industrial businesses and jobs out of the city.

Prop. M looms
The Eastern Neighborhoods plan carved out areas preserved for light industrial uses. That was before the growth of the ‘maker’ movement, which diversified the kinds of businesses seeking space and increased demand for small, flexible production sites. (And, as one city planning official noted, from almost the moment PDR districts were created, residential and office developers were trying to nibble at their edges.)

More recently, the city has tried to create incentives for construction of new PDR space, recognizing that the lower rents make industrial space unattractive or infeasible for developers to build. An ordinance backed by Supervisor Malia Cohen, Mayor Ed Lee and others created incentives by allowing developers on 15 largely vacant sites to build a combination of office and PDR space (see story at right). The higher rent on the office space would subsidize the industrial space.
“It’s kind of an experiment, but some of those parcels have very low intensity,” now featuring parking lots, storage buildings or weeds, said Joshua Switzky, a San Francisco senior planner.
But with a long line of office development projects moving toward the approvals process, some fear the limits imposed by the 28-year-old Prop. M office development cap could keep this new approach from producing a single new building. Manufacturing interests fear that attractive, high-profile office towers may get preference over less flashy office/PDR ventures if choices have to be made.

Looking to Pier 70
City officials say they’re committed to helping makers thrive as a part of a vibrant, diverse economy. “We need to make sure they have new, modern efficient, well-located space in order to stay and grow,” said Todd Rufo, director of the Office of Economic and Workforce Development.

They also point to the prospect of new industrial space as part of Orton Development’s rehabilitation plans for Pier 70. McLean, of Magnolia Brewing, said one key tool for companies is to include a retail element with their manufacturing, noting that the zoning of American Industrial Center allows him to do both. “It’s one thing to pay $3, $4, $5 a square foot (per month) for a retail business where you’ve got that retail mark-up,” he said, and manufacturers can use that mark-up to support manufacturing even if the rents are a bit steep.

American industrial Center: 800,000 square feet, and full
Greg Markoulis has lived through decades of the challenges faced by manufacturers. His family bought the 800,000-plus-square-foot American Industrial Center, a former can-manufacturing plant, in 1975. At one point, the garment industry occupied some 275,000 square feet there, but within five years after the North American Free Trade Agreement (NAFTA) took effect in 1994 it had dropped to 10,000 square feet.

“We diversified tremendously after that,” said Markoulis, general manager of AIC. The family divided the property into roughly 320 different spaces over the years, catering to smaller tenants and startups and accommodating them as they grew, he said. The owners have changed their approach as the industry changed and keep lease rates low, and that keeps occupancy high.
But demand is fierce, Markoulis said. “For the last three years we’ve been over-full.”

Markoulis prefers to have a half-dozen vacant spaces in the complex so he has flexibility to shuffle if a tenant needs more room, but the property now stays booked almost solid. “We’ve stopped giving guesstimates as to when a space will be available,” he said.

Mixing manufacturing with other uses: is it the recipe?
One of the 15 parcels where San Francisco hopes to experiment with mixing manufacturing and other space is also in the sights of Dan Murphy, principal with UrbanGreen DevcoLLC.
Murphy has submitted preliminary plans to convert the San Francisco Mini Storage and truck rental site at 100 Hooper St. into a mixed-use urban campus with two 58-foot, four-story buildings linked by elevated walkways above a courtyard.

The project is envisioned with 60,000 square feet of PDR and 333,000 square feet of ‘flexible commercial space,’ which could include office, PDR, retail or other uses, including room for classes or other activities by the nearby California College of the Arts. Murphy received a preliminary project assessment for 100 Hooper in 2012 and will hold a community meeting Sept. 13 to present plans to neighbors; he hopes to present the project to the Planning Commission this fall.

“It’s extremely well-located; it’s a gateway property to Mission Bay,” Murphy said. Murphy sees the opportunity to create an industrial version of the fertile cross-pollinating tech communities that have grown in SoMa, with part of the courtyard serving as a pedestrian public space for the complex and part allowing access to loading bays for distribution and deliveries.
SFMade officials and Murphy are both concerned that the Prop. M office limits could create a new obstacle to building industrial space.

“It’s a little alarming that we may get folded into some new (review) process,” Murphy said.

Article Link:

820 26th Street is now available for lease. This 6,300+/- SF warehouse/distribution space is totally clearspan with 20′ ceilings, sprinklers, heavy power and two (2) large drive-in doors. The property is situated only one block from the 3rd Street rail line and is located in the Dogpatch/Potrero Hill area. $8,700.00/month ($1.38 psf.)

If you have any questions about this property or the San Francisco commercial real estate market, please call 415.970.0000.

820 26th Exterior_FOR WEB

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If you have any questions about our other available listings, the San Francisco commercial marketplace or market conditions, please call our office at 415.970.0000.

3175 17th_exterior_for web

Source: San Francisco Business Times

The current boom in the tech industry isn’t necessarily comparable to the 1990s dot-com bubble, although a downturn in high-tech would significantly hurt the Bay Area economy.
Those are some of the thoughts from John Williams, the Federal Reserve’s president in San Francisco, during a sit-down interview with the Contra Costa Times.
Williams said demand for products and services during the dot-com bubble came from companies that were a mirage. He noted the current tech boom isn’t necessarily as pervasive.

However, Williams said a burst tech bubble this time around would put a large dent in the economy, especially if the wealth of employees at companies such as Facebook and Google plummeted.
Williams said the Bay Area economy is improving dramatically with the exception of the housing industry in some outlying areas.
He noted San Francisco’s economy is “on fire,” thanks to in part to a strong real estate market.

Source: San Francisco Business Times
Author: Blanca Torres

It’s no secret that tech leasing is driving San Francisco’s office market, but exactly how much?
At the end of last year, San Francisco was home to more than 53,000 tech jobs— a number that has grown significantly in recent years and is expected to keep growing.
What that means for real estate is that of the close to 3 million square feet of office space under construction,100 percent of the tenants pre-leasing space in forthcoming buildings are tech companies according to data crunched by Cushman & Wakefield. So far, those firms snatched up 70.1 percent or about 2.2 million square feet of the space under construction.

That includes buildings such as:

222 Second St., 450,209 square feet: 100 percent leased to LinkedIn.
333 Brannan St., 180,000 square feet: 100 percent leased to Dropbox.
345 Brannan St., 113,000 square feet: 100 percent leased to Dropbox.
350 Mission St., 444,000 square feet: 100 percent leased to Salesforce.
270 Brannan St., 182,000 square feet: 100 percent leased to Splunk.
415 Mission St., 1,412,898 square feet: 50 percent leased to Salesforce.
535 Mission St., 303,780 square feet: 30 percent leased to Trulia.

For existing space, the tech leasing explosion means more landlords are looking for ways to make their buildings “creative” with features like taking out dropped ceilings — a trend that applies to 14 percent of commercial business district space in San Francisco. Landlords have modified about 10.2 million square feet of traditional office space to fit the needs of tech tenants. Rents for modified space have risen an average of 52 percent since the bottom of the market to $64.44 per square foot.

Rents for “prime creative space” went up even faster, by 76.5 percent since the bottom of the market in to average asking rates of $61 per square foot, Cushman & Wakefield said. San Francisco’s office market includes about 51 buildings constituting 6.5 million square feet of creative space defined as “historic and/or brick & timber construction that has undergone a major retrofit.”
Average asking rents in San Francisco’s overall office market shot up about 55 percent to $63 per square foot since the bottom of the market.