Category: san francisco commercial real estate broker (32)

Vacancy Rate Dips for Top Quality Space as Office Absorption Remains Well Ahead of New Construction

Source: CoStar
By: Randyl Drummer
Dated Posted: October 21, 2015

The U.S. office market logged 29 million square feet of net absorption in the third quarter, the second-highest quarterly total since 2006, with demand for office space from expanding companies roughly doubling the amount of new office supply added by developers.

The 68 million square feet of net office absorption in the first three quarters of 2015 compares with an average of just 30 million square feet during the same periods in 2005 through 2007, considered to be the height of the last office boom. Meanwhile, the national office vacancy rate continued its slow and steady decline, dipping to 11% for the third quarter of 2015, down another 20 basis points from midyear and a 60 basis point decline from third-quarter 2014.

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A large majority of U.S. office submarkets, 65%, saw declining office vacancy in the third quarter, while 52% of U.S. submarkets now have lower office vacancy than during the 2006-07 peak, with most metros posting solid rent growth.

Those were among the key findings in CoStar’s State of the U.S. Office Market Third Quarter 2015 Review and Forecast presentation this week, which aslo noted one major difference from previous office market cycles: the average vacancy rate for high-quality 4- and 5-Star office space built since 2008 has remained flat, even though the 42 million square feet of new supply delivered in the first three quarters is nearly 40% above the same period in 2005-2007, said Walter Page, CoStar Group, Inc. director of U.S. research, office.

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“We’re at a rare point. Vacancy in new space has flat-lined since about 2013. What’s interesting about that is the supply pipeline has not caused the rate to spike up nationally, unlike other market cycles,” said Page, who was joined by Aaron Jodka, senior manager, market analytics and Managing Director Hans Nordby for the the office market analysis.

“Office tenants clearly want this new space and are willing to pay for it because obviously, they’re leasing it up,” Page added.

Jodka added that demand for 4-and 5-Star space grew at 2.5% between third-quarter 2014 and the most recent three-month period, compared with 1.4% in the overall office market and nearly three times the demand growth rate achieved for 1-, 2- and 3-Star properties.

Nordby noted that despite a rise in rental rates, total occupancy costs as a percentage of company profits remain at an all-time low as companies continue to put more workers into fewer square feet, which is allowing firms to continue leasing high-quality space.

Among individual markets, Dallas stood out by posting the strongest year-over-year net absorption, while Houston — plagued by space-givebacks among energy focused companies — saw the weakest demand among large U.S. metros. Perhaps due to a more diversified business base, Dallas-Fort Worth and Denver are thriving despite their exposure to the economic repercussions from the falling price of oil.

Nordby pointed out that Dallas and Atlanta are classic big-tenant markets that do well late in the economic cycle, with corporate relocations of companies that require large blocks of space driving their markets.

Link to article: US Office Demand

Source: The Registry
By: Nancy Amdur
Originally Posted: September 14, 2015

As office and industrial space in many markets gets increasingly difficult to find, a real estate Web site is launching a new service this week that allows companies to find and swap space.

The service is geared toward markets with low vacancy, said Hans Hansson, president and founding partner of the site, TradeAddresses.com. Once the Bay Area site is under way, the service will debut in Seattle, New York and Austin. Those markets have a “lack of space, are technology-oriented, and we have boots on the ground there to support the business,” Hansson said.

The site allows companies to “trade their leases to accommodate their actual needs,” when it is difficult to find space on the open market, Hansson said.

Trades can include leaving some or all of a space’s furniture and equipment. There is no guarantee that the lease price will remain the same when swapping, though. “It’s not about trading rent, it’s about securing space,” he said.

TradeAddresses since 1999 has been generating commercial real estate transactions. The company added the swapping service in 2000, but after seven months and about 25 trades, the market crashed and the company ended the service, Hansson said. This is the first time industrial space is being included in the service.

Hansson, a real estate veteran who is president, principal and founding partner of San Francisco real estate company Starboard TCN Worldwide, reinvigorated TradeAddresses with partners Jim Osgood, owner of office space referral and information network OfficeFinder.com, and Carl Bosse, owner of The Associate Realty of the Americas, a national network of high-end residential and commercial agents.

Tech companies are likely candidates for using the service because they are “fluid,” Hansson said, but other types of companies also are potential users.

Bay Area office vacancy is at 9.1 percent and has declined for 21 consecutive quarters, according to a second quarter 2015 report by commercial real estate company DTZ. Space also is being taken quickly. As an example, since early last year, 4.6 million square feet in new development projects in Silicon Valley has been pre-leased, 99.5 percent by technology companies, according to a recent report analyzing the top 30 tech cities in North America by commercial real estate firm CBRE Group, Inc.

Hansson said the company added industrial properties to the service because much existing product is aging, little new industrial space is being built and some sites are being converted to mixed-use or residential developments. Industrial vacancy in the Bay Area was 3.4 percent for the second quarter this year, down from 4.6 percent during the same period in 2014, according to a DTZ report.

TradeAddresses also allows a company “to test the waters” before telling a landlord it wants to sublease, Hansson said. In some leases, a landlord could take back space intended to be sublet before a company finds new space, he said.

Site users can post and seek space for free. They initially do not give a name or address and just enter information about their space such as size, general location and length of the sublease. This is primarily done because most leases have provisions where the landlord, once notified of intent of a sublease, has the option to cancel the remainder of the lease. Both companies pay 4 percent of the remaining lease term to TradeAddresses if a trade is made.

TradeAddresses uses its own brokers—called trade facilitators—who use a proprietary database to access off-market space and work with the companies. Companies also can find space on TradeAdresses then turn the deal over to their own brokers, though TradeAddresses would still retain its fee if the trade is made using properties listed on the site.

Additionally, companies listing a property on TradeAddresses can still market their property in other ways.

Hansson said that in a traditional market, the service likely would not be necessary. “It handles inefficiency in the market today, because there is no space,” he said.

link to article: Dwindling Office & Industrial Vacancies

Cash Flow, CRE Fundamentals Pose Strong Counter Punch to Potential Rate Increase Impact on CRE Values According to Accounting Firm
Source: CoStar News
By: Mark Heschmeyer
Reposted: September 16, 2015

As the Federal Reserve readies an expected decision this week on whether to begin raising interest rates, common assumptions among some commercial real estate investors, developers and lenders are that CRE values will take a hit when interest rates are raised.

The basis for this assumption appears intuitive at first. Rising benchmark interest rates, like Treasuries, should tend to make all yield-oriented investments to be less attractive,

However, according to a new report issued this week by accounting firm EY, the relationship between interest rates and CRE values is much more nuanced. While the Fed’s initial policy adjustments likely will have a marginal impact on CRE valuations and investment momentum, interest rates and cap rates aren’t always correlated, the EY report authors claim.

Several factors affect the trajectory of capitalization rates and real estate values, such as demand and supply changes, transaction activity and trends in the overall economy. An in the current market, CRE fundamentals are strong.

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At the worst, EY predicts, an uptick in the federal funds rate may make it more expensive to develop new projects and refinance certain debt, and possibly cause a reactionary sell-off in publicly traded real estate investment trusts (REITs).

However, as it currently stands, relative to historical averages over the last 30 years, the spread between the 10-year Treasury and CRE yields appears to allow for further compression. This suggests that CRE values are not immediately threatened by rising interest rates, EY said.

The EY report was authored by members of EY’s real estate M&A advisory team led by Steve Rado, a principal in Ernst & Young LLP’s Transaction Advisory Services practice, with contributing author Dr. W. Michael Cox, the former chief economist of the Dallas Federal Reserve Bank and a professor at Southern Methodist University’s Cox School of Business.

EY noted several drivers that are expected to buttress real estate values, including record amounts of inbound capital, available private equity ‘dry powder’ for investment, a generally positive economic outlook with some obvious caveats, and relatively strong CRE fundamentals.

A 25 to 50 BPS Jump Doesn’t a Spike Make

A shock to the U.S. CRE investment environment from a 25 to 50 bps increase in the overnight lending rate seems unlikely in light of the forecasted environment for the sector, according to EY. With vacancies trending down in office, retail and industrial properties and hospitality and multifamily exhibiting increased rents, the report’s authors expect the effect of contractionary monetary policy and rising interest rates on real estate values and cap rates to be mitigated in the near term, especially for investors focused on cash flows from higher lease rates and strengthened property operations.

While many observers purport a negative outlook for CRE based on the premise of a spike in long-term interest rates, the possibility that long-term interest rates will see only moderate increase over the near term is more likely given the slower pace of the U.S. economic recovery, the EY analysts said.

They also expect CRE will continue to be an attractive investment on a risk-adjusted basis in the near-term, given current conditions of increased capital supply and strong fundamentals, along with room for compression in the spread between cap rates and interest rates, according to the report.

However, EY cautioned investors on underwriting risk as trophy assets in gateway markets appear to be fully priced with new supply is coming on the market at a faster pace.

Finally, the EY report authors urged investors to see the glass as half-full rather than half-empty.

“Actions of the Fed to normalize interest rates should not be seen as a bane for the industry, but rather should instill confidence that their efforts are a proactive measure to provide stability in the future,” the EY report concluded.

Link to article: Interest Rates & CAP Rates

Despite Investor Concerns of Overheating, Market Indicators Support CRE Pricing
Re-posted: CoStar News
By: Randyl Drummer

As commercial real estate prices have continued to surge, some have become concerned that valuations may be overheating or even reaching bubble levels as a combination of high demand, low interest rates and loosening loan underwriting standards contribute to a record spike in deal activity and price paid per square foot for trophy properties in top U.S. and global markets.

But while investors and analysts agree the surging demand for commercial property should be closely scrutinized for signs of overheating, several market indicators appear to reflect solid justification for the upswing in prices. So while peaking prices are a concern, analysts said it is premature to characterize the recent valuation increases as a ‘bubble’ that will inevitably lead to a market correction.

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Rather, they said, the price increases seen over the past 12 months appear to be a direct function of the long period of low interest rates in a low-yield environment, coupled with strengthening fundamentals and rising property-income levels.

“Indicating that we are not in a bubble, we are still seeing a wide pricing gap for taking risk that did not exist in 2006 and 2007, when vacant buildings could fetch premium pricing because investors did not have to wait for leases to expire to get at the embedded rent growth,” said Walter Page, director of U.S. research, office, for CoStar Portfolio Strategy. “Capital is very risk adverse compared to 2007.”

Perhaps most significantly, Page added, previous pricing bubbles have burst only after developers flooded the market with a large supply of new space within a very short time. With the possible exception of the office construction boom in Houston, this is not the case today.

Showing a measure of caution following recent stock market volatility and swings in August and into September, property investors appear to be taking a pause to assess conditions, with previously acquisition-minded investors now saying, “Not so fast.”

In recent meetings with several major investors, Page said the discussions have changed tone and now focus on not rushing in and taking their time to place money. As a result, they expressed expectations that sales volumes may slow somewhat in the second half of 2015, Page said.

Price appreciation has also slowed, both from earlier this year and compared with the early to mid-recovery period from 2010 to 2013, suggesting that pricing is reaching market-clearing levels, added Page.

Using the term ‘bubble’ to describe the current pricing advances gives the false perception that the market is not stable and is ready to burst,” notes Andrew Nelson, chief economist for Colliers International.

“Investors like to buy closer to the bottom, and it certainly seems we’re closer to the top, even if not quite necessarily there,” Nelson said. “At the same time, market fundamentals are strong and getting stronger, and I do believe we have some time left on the clock in terms of continued economic growth.”

While the abundant supply of cash looking to find a home in U.S. properties is helping to propel sales, only about half of U.S. office markets are achieving pricing above the last peak, with top-tier markets like San Francisco, New York and San Jose leading the way. Other major world cities show a similar trend.

CoStar sales data shows record CRE sales volumes in all product types totaling $600 billion over the past four quarters, which is 7% above the 2007 record of $556 billion, and up by 23% from the four-quarter period a year earlier.

Office sales of $148 billion over the past four quarters trail the record $203 billion in 2007, which included $60 billion in sales and re-trading stemming from sale of Equity Office Properties to Blackstone, which some consider to mark the previous cycle’s peak. The current four-quarter sales volume represents a 21% increase from a year earlier, so clearly office sales volumes are strong, Page said.

However, the office value appreciation rate has slowed to 2.4% over the past year, down from the 5% to 8% appreciation rate between 2011 and 2013, Page said. Value increases over the past year have ranged from just over 4% in the San Francisco Bay area to less than 1% in Chicago, Seattle, and Denver.

A marked slowdown in cap rate compression, from 50 to 90 basis points per year during the 2010-2013 period to a 20 bps decline over the past year, also has contributed to the slowing depreciation.

“Because of the expectation of rising interest rates, we are forecasting that the current 5.7% national office cap rate will mark a market bottom, with a rise of 20 basis points forecasted by 2018,” Page said.

Valuations should increase in most markets for several more years, suggests that the growing strength of local economies will be a key factor in improving property returns, Page said.

“Our forecasted annual returns through 2019 range from over 9% for San Francisco and Nashville to 2% for Houston and Washington, D.C.”

Also, rent levels in a large number of metros have not yet risen to the point that justifies new office construction. With the exception of multifamily, levels of new supply remain moderate in most property types, particularly the office market, where construction is almost exactly at its long-term average of roughly 124 million square feet per year, well below the 184 million square feet added at the peak of the last market bubble, Page pointed out.

Moreover, the construction is highly concentrated in about one-third of U.S. markets, led by Houston and New York with 13 million square feet. Seattle, San Jose and San Francisco are also hot spots for office construction.

The remaining two-thirds of markets have roughly half their historical level of new office construction, yet the vacancy rates for these markets are about the same as in 2007.

Globally, property is expensive on a per-pound basis in some top markets, and cap rates are low for the best properties, typically signaling modest returns and expensive pricing, Colliers’ Nelson agrees. With inflation and interest rates still very low, however, spreads between cap rates and long-term Treasury note remain above their long-term averages, making pricing look much more reasonable, he added.

Link to article: Market Indicators Support CRE Pricing

CompStak:  San Francisco Office Rents Continue Their Rise
Re-posted from:  The Registry Bay Area Real Estate
By:  Robert Carlsen
Date Posted:  August 30, 2015

Many brokers, appraisers and developers have experienced San Francisco’s strong first half of the year in commercial real estate, with demand for office space continuing to outpace supply and office rents increasing across all building classes and submarkets.

While Class A and B buildings in San Francisco both had quiet starts to 2015, they recently picked up to close the first half of the year in the black, according to CompStak Exchange, a New York-based commercial real estate database specializing in lease comparables.

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CompStak’s second quarter 2015 effective rent report said that Class A effective office rents in San Francisco were up 6.6 percent to $65.29 per square foot over the previous six months and Class B buildings performed even better, with effective rents increasing 12 percent to $59.40 per square foot over the same time period.

And with the tightness of available office space comes the absence of perks. “Landlords who also own property in markets outside of San Francisco know how favorable market conditions really are,” the report said. “Concessions given in San Francisco are far below comparable markets like Los Angeles, Manhattan and Washington, D.C.”

“For example, tenants in Washington, D.C., and Los Angeles County receive, on average, twice as much in free rent and tenant-improvement dollars. The strength of the San Francisco leasing market is evident when viewed in this light.”

According to Blake Toline, a CompStak research analyst, most of the demand driving up prices in San Francisco is coming from technology companies, which has been a trend over the past few quarters. The north and south Financial Districts typically have more corporate tenants, such as law, finance and consulting firms, “but that is starting to change as space around the city becomes harder to find, forcing tech tenants that wouldn’t have normally looked at the central business district to sign space there,” he said.

CompStak said that Class B buildings offer space with more character, unique interiors with exposed brick, operable windows and open floor plans, which makes them more attractive to tech tenants.

Toline provided some recent submarket tenant rent increases over the past six months.

In the lower South of Market area, Class B space is up 3.8 percent to $67 per square foot. Recent lease deals in the region include Elance at 475 Brannan St., which featured an 18,000-square-foot expansion, resulting in an effective rent in the mid-$70s; Hipmunk at 434 Brannan St., which included a 17,000-square-foot short-term renewal and saw effective rents in the high $60s; and HoneyBook at 539 Bryant St., which included a 15,000-square-foot rental in the low $70s.

In the south Financial District, Class A space is up 3.5 percent to $69.80 per square foot. Recent lease deals include WeMo Technologies at 555 Market St., which rented 172,000 square feet in the high $60s; Instacart at 50 Beale St. has 56,000 square feet of lease space in the high $60s; and Intercom at 55 2nd St. has 23,000 square feet of space in the mid-$70s range.

Additionally, in the north Financial District, Class A space is up 5 percent to $65 per square foot. Recent deals include a Sheppard Mullin Richter renewal at 4 Embarcadero, with 72,000 square feet of space in the high $70s; Sentient Technologies at 1 California St., with 17,000 square feet going for the low $70s; and HIG Capital at 1 Sansome, with its 11,000 square feet priced in the low $70s.

Link to article: SF Office Rents Continue Their Rise

San Francisco’s Vacancy Decreases to 3.6%
Net Absorption Positive 218,378 SF in the Quarter
Source: CoStar

The San Francisco Industrial market ended the first quar- ter 2015 with a vacancy rate of 3.6%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 218,378 square feet in the first quarter. Vacant sublease space increased in the quarter, ending the quarter at 413,869 square feet. Rental rates ended the first quarter at $16.40, an increase over the previous quarter. A total of two buildings delivered to the market in the quarter totaling 108,080 square feet, with 252,593 square feet still under construction at the end of the quarter.

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Absorption

Net absorption for the overall San Francisco Industrial market was positive 218,378 square feet in the first quarter 2015. That compares to positive 265,569 square feet in the fourth quarter 2014, negative (20,730) square feet in the third quarter 2014, and positive 958,846 square feet in the second quarter 2014.

Tenants moving out of large blocks of space in 2015 included U-Save Equipment & Tool Rental moving out of (21,000) square feet at 1258 Bayshore Blvd.

Tenants moving into large blocks of space in 2015 include: Green Leaf moving into 105,600 square feet at 455 Valley Dr, Myokardia moving into 45,404 square feet at 333 Allerton Ave, and CloudFlare moving into 43,519 square feet at 101 Townsend St.

The Flex building market recorded net absorption of posi- tive 3,656 square feet in the first quarter 2015, compared to positive 129,751 square feet in the fourth quarter 2014, positive140,779 in the third quarter 2014, and positive 276,608 in the second quarter 2014.

The Warehouse building market recorded net absorp- tion of positive 214,722 square feet in the first quarter 2015 compared to positive 135,818 square feet in the fourth quarter 2014, negative (161,509) in the third quarter 2014, and positive 682,238 in the second quarter 2014.

Vacancy

The Industrial vacancy rate in the San Francisco market area decreased to 3.6% at the end of the first quarter 2015. The vacancy rate was 3.8% at the end of the fourth quarter 2014, 4.0% at the end of the third quarter 2014, and 4.1% at the end of the second quarter 2014.

Flex projects remained at a vacancy rate of 5.3% at the end of the first quarter 2015 compared to the previous quarter, 5.8% at the end of the third quarter 2014, and 6.4% at the end of the second quarter 2014.

Warehouse projects reported a vacancy rate of 3.1% at the end of the first quarter 2015, 3.3% at the end of fourth quarter 2014, 3.4% at the end of the third quarter 2014, and 3.3% at the end of the second quarter 2014.

Sublease Vacancy

The amount of vacant sublease space in the San Francisco market increased to 413,869 square feet by the end of the first quarter 2015, from 285,144 square feet at the end of the fourth quarter 2014. There was 290,380 square feet vacant at the end of the third quarter 2014 and 314,753 square feet at the end of the second quarter 2014.

San Francisco’s Flex projects reported vacant sublease space of 186,108 square feet at the end of first quarter 2015, down from the 208,699 square feet reported at the end of the fourth quarter 2014. There were 91,366 square feet of sublease space vacant at the end of the third quarter 2014, and 129,748 square feet at the end of the second quarter 2014.

Warehouse projects reported increased vacant sublease space from the fourth quarter 2014 to the first quarter 2015. Sublease vacancy went from 76,445 square feet to 227,761 square feet during that time. There was 199,014 square feet at the end of the third quarter 2014, and 185,005 square feet at the end of the second quarter 2014.

Rental Rates

The average quoted asking rental rate for available Industrial space was $16.40 per square foot per year at the end of the first quarter 2015 in the San Francisco market area. This represented a 4.1% increase in quoted rental rates from the end of the fourth quarter 2014, when rents were reported at $15.75 per square foot.

The average quoted rate within the Flex sector was $26.61 per square foot at the end of the first quarter 2015, while Warehouse rates stood at $12.23. At the end of the fourth quarter 2014, Flex rates were $25.23 per square foot, and Warehouse rates were $11.94.

Deliveries and Construction

During the first quarter 2015, two buildings totaling 108,080 square feet were completed in the San Francisco market area. This compares to 0 buildings completed in the previous three quarters.

There were 252,593 square feet of Industrial space under construction at the end of the first quarter 2015.

Some of the notable 2015 deliveries include: 901 Rankin St, an 82,480-square-foot facility that delivered in first quar- ter 2015 and is now 100% occupied by Goodeggs and Mollie Stone’s Markets, and 1 Kelly Ct, a 25,600-square-foot building that delivered in first quarter 2015 and is now 100% occupied by CS Bio Company, Inc.

The largest projects underway at the end of first quarter 2015 were The Cove – Building 3, a 132,034-square-foot building with 0% of its space pre-leased, and The Cove – Building 4, a 120,559-square-foot facility that is 0% pre-leased.

Inventory
Total Industrial inventory in the San Francisco market area amounted to 94,507,020 square feet in 4,841 buildings as of the end of the first quarter 2015. The Flex sector consisted of 23,955,743 square feet in 789 projects. The Warehouse sector consisted of 70,551,277 square feet in 4,052 buildings. Within the Industrial market there were 516 owner-occupied buildings accounting for 12,428,802 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 fourth quarter 2014 in terms of dollar volume compared to the third quarter of 2014.

In the fourth quarter, nine industrial transactions closed with a total volume of $58,055,000. The nine buildings totaled 430,025 square feet and the average price per square foot equated to $135.00 per square foot. That compares to eight transactions totaling $80,684,000 in the third quarter. The total square footage was 349,762 for an average price per square foot of $230.68.

Total year-to-date industrial building sales activity in 2014 is up compared to the previous year. In the twelve months of 2014, the market saw 46 industrial sales transactions with a total volume of $410,518,100. The price per square foot has averaged $199.10 this year. In the twelve months of 2013, the market posted 31 transactions with a total volume of $191,567,100. The price per square foot averaged $176.40.

Cap rates have been higher in 2014, averaging 6.35%, compared to the twelve months of last year when they averaged 6.19%.

Link to Full Report: Costar Q1 Industrial Report 2015

Source: San Francisco Business Journal
Reporter: Cory Weinberg
Date Posted: April 23, 2015

About 50,000 square feet of space in at 1455 Market St. just hit the market – a big block leased by the public advertising tech company Rocket Fuel. The brokerage Savills Studley said in a report that Rocket Fuel (NASDAQ:FUEL) is the kind of company subleasing space after “not expanding as quickly as anticipated or shedding a bit of payroll.” After the company’s revenue growth faltered, it said it wouldn’t hire as aggressively.

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Rocket Fuel isn’t alone in shopping around its offices. The sublease market in San Francisco has suddenly ticked up, and sublease space now makes up the largest percentage of vacant space since the depths of the recession, according to new data by the brokerage Cushman & Wakefield. San Francisco and Silicon Valley lead the nation in sublease space as a percentage of vacancies – about 13 percent for each.

It’s a leading indicator important enough to raise eyebrows if it means that companies got too ambitious with their real estate needs and are shedding space – puncturing a hole in a potential office market bubble.

But market watchers aren’t jumping to that conclusion yet.

Developers and brokers aren’t panicking because the raw amount of sublease space on the market in San Francisco – nearly 650,000 square feet – doesn’t come close to the 2 million square feet of subleased space on the market during the recession or the 6 million square feet during the dot-com bust. The amount of total vacant space is also at a 15-year low, according to Cushman & Wakefield.

Sublease space increased a bit last quarter in part because “tenants (particularly tech-related tenants) are leasing or pre-leasing ahead of hiring to lock in today’s rents before further increases,” Cushman & Wakefield’s research director Robert Sammons wrote.

Sammons said San Francisco and Silicon Valley’s high proportion of subleased space has some likely company: New York City’s Midtown South submarket, which is also heavy on technology companies, has the same sublease rate.

“Not every tech firm is going to be the next Google, so there will be an ebb and flow where they expanded more than they should have,” he added in a phone call. “The flip side of that is that there are a lot of tenants looking for built, plug-and-play space because they don’t know what the next year is going to bring them.”

Plus, he added, San Francisco is still posting some of the best employment numbers in the country and office development hasn’t slowed – two other indicators to watch.

A boost in sublease space can help companies feeling the squeeze from the city’s 8.1 vacancy rate, one of the lowest in the nation. The companies shedding the space get to cash in, too.

The digital real estate marketplace Trulia (NASDAQ:TRLA), for example, just put two floors – 26,600 square feet – up for sublease in the new, gleaming 535 Mission St. tower. A spokesman said the company is “investigating opportunities in the normal course of business” and taking advantage of San Francisco’s “hot commercial real estate market.” The company was also just acquired by Zillow, which also put about 20,000 square feet of its 222 Bush St. on the sublease market.

Even Salesforce (NASDAQ:CRM) is subleasing about 144,000 square feet in One California St. and 70,000 square feet in 123 Mission St. as it moves into its eventual urban campus next to the Transbay Transit Center.

Other available sublease spaces include Microsoft’s 30,000 square feet at 835 Market St., Conversant’s 32,000 square feet at 160 Spear St. and IZ-ON’s 40,000 square feet at 600 Harrison St.

In San Carlos and Redwood City, new sublease openings by SoftBank and DreamWorks add up to about to 400,000 square feet
“In most cases, sublet space has been added by companies that are banking space for future use and want to monetize in the meantime,” according to Savills Studley’s latest market report. “The sublet space provides scant relief to a space-parched market.”

Link to article: Office Space Bubble

Calco Commercial Real Estate has been named a “Top Leasing Firm” by CoStar! Additionally, Scott Mason has also won a “Power Broker” Award as a top Industrial Broker in San Francisco for 2014. Click here for the full story:

Costar Power Broker Winners

Over the past year, Calco Commercial has completed over 55 industrial, flex and office lease and sale transactions totaling 340,000+/- square feet. Based on the number of successfully completed industrial real estate transactions, Calco Commercial is the number one industrial leasing/sales brokerage firm located in San Francisco. Calco Commercial Real Estate has completed more industrial real estate deals than any other firm in San Francisco over the last year, and continually out-performs the competition. Calco is an independently run and locally founded company specializing in Landlord and Tenant representation. If you have any commercial real estate requirements or simply have questions about the San Francisco or Peninsula real estate markets, call 415.970.0000.

San Francisco

Warehouses become highrises: Map of S.F.’s Central SoMa real estate boom
Source: San Francisco Business Times
Reporter: Cory Weinberg
Posted: April 6, 2015

When you look at the map of some of the most ambitious projects that developers are proposing in South of Market, they’re concentrated along the new Central Subway and near the current Caltrain station at 4th and Townsend Streets.
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On Friday, the Business Times reported that a family trust called Solbrach Property Group filed plans to build a 350-foot residential highrise with 426 units at 4th and Brannan Streets. Around that block, huge office and residential projects by CIM Group and Tishman Speyer will transform the industrial area that is being rezoned.

The Board of Supervisors is expected to green light the rezoning by early next year. That will unlock huge value for landowners to build taller office or residential buildings, which would replace the existing — and less lucrative — production, distribution and repair buildings. That value has created pressure for the city to extract enough money from developers for affordable housing, which I detailed in a February cover story.

Even though the Solbrach residential development is in the very early stages, it could turn into a showdown over heights. The proposed tower will sit on a plot that’s only 16,000 square feet, so it’s not one of the largest in the neighborhood. The Planning Department only wants the building to be 250 feet high — at most — and neighborhood activist John Elberling echoes that sentiment.

“Jamming a luxury highrise into there really is too much. We want to focus development of that maximum scale — residential or commercial — on the large sites in SoMa that are at least one acre in size,” said Elberling, who runs the affordable housing advocacy group TODCO.

The Planning Department recently published guidelines for large development sites “that offer tremendous potential for transformative new development.” In its guidelines for how high developers can build, it reiterates that “the predominant character of SoMa as a mid-rise district should be retained,” instead of it becoming a slew of highrises.

Link to article: Warehouses become highrises

Source: San Francisco Business Times
Reporter: Jahna Berry
Date: March 26, 2015

A lawsuit challenging a popular San Francisco ballot measure that requires voters to OK height increases for waterfront projects may proceed, a judge ruled Wednesday.
Poll: Can the state sink S.F.’s waterfront law?

Proposition B, which was passed overwhelmingly, requires voter approval for any new building on Port of San Francisco property that exceeds existing height limits, which generally range from 40 feet to 84 feet. The land encompasses a 7 ½ mile stretch of waterfront that is some of the city’s most desirable and expensive real estate.

In a lawsuit filed last July, the California State Lands Commission, which regulates much of the state’s waterfront land, argued that San Francisco voters shouldn’t get a say in development on port property, like Pier 70 or the Giants’ Mission Rock project. The commission said that the port is actually under the state’s control. Also, the port needs developers to build on its properties to close a $1.6 billion budget shortfall, the state argued, and Prop. B could halt that development.
City Attorney Dennis Herrera asked Superior Court Judge Suzanne Bolanos to throw out the state’s lawsuit. He has argued that Prop. B doesn’t hurt development. Developer Forest City has already successfully won voter approval for a waterfront project at Pier 70, he argued.

On Wednesday, Judge Bolanos denied some of the state’s motions, but ruled it could present evidence of the law’s economic impact. The litigants could start arguing that part of the case in May.

Herrara lauded Bolanos’ ruling, which he said underscores that the city’s law doesn’t conflict with the Burton Act. The state has argued the 1969 act gives it controls of the port land.

Link to Article: SF Waterfrong