Mid-Year San Francisco Industrial Market Update

The second quarter of 2013 ended with a vacancy rate of 7% for the entire San Francisco Industrial Real Estate Market. The 7% rate is a drop from Q1 2013 with a net positive absorption of approximately 440,000 square feet. Marking the second consecutive quarter of positive net absorption, rental rates increased at the end of Q2 2013 by 3.1% to approximately $1.12 psf.

The second quarter ended with a tightening of warehouse product with a vacancy rate of 5.5%, which is a drop from 5.9% at the end of Q1 2013. Meanwhile, Flex space reported a slight vacancy increase to 11.5% at the end of Q2 2013 over the 11.4% vacancy rate at the end of Q1 2013.

What does this all mean?

As industrial/commercial real estate product continues to shrink in the San Francisco Market and lack of new inventory/construction projects, prices will continue to rise and competition for vacant spaces will be steep.