San Francisco Year-End Market Highlights

Lease & Sublease Activity

The 4th quarter of the San Francisco industrial marketplace was punctuated by a decrease in vacancy from 6.6% (end of 3rd quarter) to 5.9% with net absorption equal to positive 602,366 square feet.  As to be expected with the further decrease of available product, fourth quarter rents increased from 3rd quarter rates of $13.76 ($1.15 psf.) to $14.40 ($1.20 psf.). 

Similarly, both the flex sector and sublease markets saw a decrease of available space.  The flex sector reported 129,587 square feet at the end of the 4th quarter, down from 136,326 square feet at the end of the 3rd.   Flex rates increased slightly in the 4th quarter to $22.68 ($1.89 psf.) from $22.64 in Q3. 

New inventory remains sparse as there was no industrial space under construction at the end of Q4 2014. 

Sales Activity

The sales activity for the San Francisco industrial marketplace slowed at the end of the year with only four sales compared to 10 in the previous quarter.  Furthermore, year-to-date sales are also down compared to 2012.  The price per square foot for sales in San Francisco averaged $178.47 this year, which is up from $145.31 per square foot in 2012.   Cap rates have also been lower in 2013, averaging 5.78% compared to 6.78% in 2012.  

According to CoStar “one of the largest transactions that occurred within the last four quarters in the San Francisco market is the sale of 2200 Jerrold Avenue.  This 97,093 square foot flex building sold for $19,000,000, or $195.69 per square foot.”  The sale of Jerrold Avenue was brokered by Calco Commercial, Inc. and was not only one of the largest sales of 2013 in San Francisco, but in the top three sales in the Bay Area industrial marketplace including San Mateo County. 

Data source:  www.costar.com

If you have any questions on current market conditions, available commercial properties or have an asset you would like to lease or sell, call us at 415.970.0000.