Category: san francisco office for lease (6)

Charles Schwab, Square latest companies to unload S.F. office space
Source: San Francisco Business Times
Reporter: Cory Weinberg
Date Posted: May 26, 2016

The amount of office space available for sublease in San Francisco is about to reach a five-year high now that mobile payments company Square and Charles Schwab are expected to lighten their footprints.


A Charles Schwab (NYSE: SCHW) spokesman told the Business Times that it is looking to sublease its 327,000 square feet at 215 Fremont St. so it can eventually consolidate into one building at 211 Main St.

Square just put 50,000 square feet on the market from its 1455 Market St. space, Bloomberg reported. That would reduce Square’s leased space there by one-fifth and comes soon after neighboring tenant Rocket Fuel Inc. also put a big block of space on the market after revenue and hiring slowed.

As more companies ditch their office spaces, it raises alarms for a potential commercial real estate downturn, as I detailed last month. Those alarms may blare more loudly now that these potential listings put sublease space at about 1.7 million square feet, San Francisco’s highest total since the tail end of the recession in the last quarter of 2009.

With both real estate developers and tech companies relying on cheap capital, rising interest rates could dent those markets, Glenn Kelman, CEO of brokerage Redfin Corp. said on Bloomberg Television last week.

“There’s a bubble,” Kelman said. “There are prices that are too high on companies. There are prices that are too high on real estate. As interest rates go up, you’re going to see a contraction.”

But these two cases also highlight a paradox on the city’s real estate market – traditional companies that are fleeing the city to lower costs and technology companies looking to lap up as much space as they can afford in a tight real estate market.

Square is one of several tech companies (like Trulia, Zillow and Salesforce) that have looked to gobble up space way ahead of what they actually need in order to anticipate future growth in a space-constrained market. That’s also why the office vacancy rate is at a 15-year low, according to Cushman & Wakefield.

It’s also why 80 percent of the 4.1 million square feet of office space under construction in the Bay Area is pre-leased, as DTZ research director Garrick Brown detailed in a March blog post. He said there’s little reason to worry, even if the economy takes a dive in a couple years.

“So if current leasing trends persist, it is highly likely that none of this space will be delivered without a tenant connected to it. None! So is there about to be an oversupply of office space in San Francisco? It sure doesn’t look that way to me,” Brown wrote.

This is Charles Schwab’s second round of San Francisco consolidation in recent years, after it subleased its old headquarters at One Montgomery in 2009 to cut expenses. Last year, it announced intentions to move hundreds of jobs out of San Francisco to lower-cost places like Colorado and Texas.

“As the number of San Francisco employees has gradually declined, it has made it possible this year to consolidate some of our office space in the 215 Fremont building. Hence there is space available there for leasing,” Charles Schwab spokesman Greg Gable told the Business Times last week.

Real estate brokers said they haven’t seen the South Financial District space officially hit the market yet, so it’s unclear how it will be priced. Charles Schwab signed a deal there in 2001, renting at an ultra-low rate of $21 a square foot through 2024, according to CoStar.

Link to article: Office Bubble

BY THE NUMBERS: U.S. Office Construction Picking Up Momentum
108 Million Square Feet Under Construction-Highest Total since 2009

Source: Costar
By: Randyl Drummer
Date Posted: April 29, 2015

After nearly five years of steady but relatively moderate increases, deliveries of newly constructed office space exceeded quarterly office demand nationally in the first quarter as office construction levels moved closer toward their long-term average across the country.

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About 15 million square feet of office space was delivered to the U.S. market in the first quarter of 2015, for the first time in the current economic cycle eclipsing total net absorption of office space, which was just over 12 million square feet, according to CoStar office market data.

About 108 million square feet was under construction at the end of first-quarter 2015, up 17% from 92 million square feet in the same period a year ago, according to CoStar data. The level of national office construction has risen very slowly since hitting its long-term historical trough of less than 50 million square feet in late 2010, producing quarterly supply growth that was the moral equivalent of zero when factoring in demolitions of obsolete office space and other loss of inventory.

With higher office rents making new development a viable alternative to buying existing buildings, the amount of office space under construction is finally approaching its quarterly historical average of 122 million square feet, a level last attained in late 2008.

Construction levels are above their historic norm in about one-third of the largest U.S. metros, led by Northern California’s Silicon Valley, where Apple is building its 2.8 million-square-foot “spaceship” corporate campus in Cupertino; and Houston, where ExxonMobil is building its huge new corporate campus. Total space under construction amounts to 7% and about 6%, respectively, of those markets’ rentable inventory.

Other markets seeing an above-average construction bump are Seattle, Austin, San Francisco, Raleigh, Dallas-Fort Worth, Boston, Chicago and Denver.

Shift In Strategy for Developers

Along with the growing demand for new office space comes a shift in strategy for the nation’s largest owners and developers of office buildings, especially those with projects in the largest U.S. CBDs.

Rather than in acquiring buildings at rapidly appreciating prices in its core markets of Boston, San Francisco and Washington, D.C., Boston Properties (NYSE: BXP) is stepping up its strategy of re-investing capital it recycles from the sale of older buildings into new developments that yield higher returns.

“We are spending more time looking at new investments and development sites, or buildings requiring repositioning — both of which leverage our development and operating skill,” said Owen Thomas, Boston Properties chief executive officer, citing the company’s development pipeline of 11 office projects totaling 3.3 million square feet with a total projected cost of $2.1 billion.
Thomas told investors this week that BXP forecasts that these projects funded by cash on the balance sheet will generate a more than 7% cash net operating income yield over the next three years upon completion.

Rising office rents are driving the development boom in metros such as San Francisco, where Boston Property is building the 61-story, 1,070-foot-tall Salesforce Tower, formerly known as the Transbay Tower in the South of Market district. While rents in the Bay City have spiked 70% since the recession, however, two-thirds of the country is still not seeing the kind of rent growth that justifies large-scale new construction, including big metros such as Orange County, CA, Los Angeles and Atlanta.

Other metros seeing limited development or construction compared with history or are starting to cool down are Washington, D.C., Phoenix, San Diego and New York City.

Major project starts in the first quarter included the 1.7 million-square-foot campus fully leased to FMC Technologies in Houston. Also getting under way was the 610,000-square-foot Crosstown Concourse office project, a value-add redevelopment of the former Sears & Roebuck building pre-leased to St. Jude Children’s Research Hospital and other tenants.

Lincoln Property Co. has started 350 Bush Street, the first new office building in San Francisco’s Financial District in more than a decade. The speculative 433,000-square-foot project is driven by a tight 7.8% vacancy rate for top quality 4- and 5-Star buildings in the submarket.

In Phoenix’s Tempe submarket, Ryan Companies and Sunbelt Holdings have started 300 E. Rio Salado Parkway, a 480,000-square-foot building preleased to State Farm for a regional hub.

Office developers delivered 15 million square feet in the quarter, compared with 11 million square feet in the first quarter of 2014, and while completions will pick up slightly through the rest of the year, they will likely total between 65 and 70 million square feet, below the historical completion rate.

Notable first-quarter deliveries included the 1.5 million-square-foot second phase of ExxonMobil’s corporate campus in Houston; and 1K Fulton, a 689,067-square-foot building in the Chicago market that is now 39% occupied, according to CoStar information.

Link to article: US Office Construction

Calco Commercial Real Estate, is pleased to present 385-A 8th Street, which will be available to lease March 1, 2015. The commercial office space includes 4,736+/- square feet of second floor funky/creative space, a full kitche, skylights, hardwood floors, rooftop deck and an open floor plan. Situated in the SOMA, this space would be great for a creative user. The space will lease for $2.50 psf. or $30.00 psf. annual.

If you have any questions about this office listing, our other available properties, or the San Francisco commercial real estate market, please call our office at 415.970.0000.

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Source: San Francisco Business Journal
Reporter: Cory Weinberg
Date: January 2, 2015

If the much-hyped San Francisco spillover of office tenants is ever going to happen, this will be the year. The city’s squeeze could start to take a noticeable toll in 2015, and other cities will be waiting with giant nets to scoop up big-name companies.

Until now, the tenant trickle to the East Bay and San Mateo County has been mostly talk. Companies recruiting young workers have flocked to San Francisco and seem to think the high cost of renting offices is worth the trouble.

Two converging forces may turn the hype into reality. First, San Francisco officials expect the city this year to hit the new office space cap imposed by the 1986 law under Proposition M.

About 4 million square feet of large office projects will be up for approval this year, enough to tip over the annual limit and constrain what gets approved. That doesn’t mean that office users will see much of an effect this year, but it is a restriction on new space nonetheless that may eventually send office rents much, much higher.

Meanwhile, Oakland, Daly City, San Mateo and San Ramon all have openings in large, attractive buildings near transit.
Oakland’s Sears building should land a tech tenant in the first half of 2015.

“San Francisco tech job growth has been seven times greater than in Silicon Valley. When you see the stats, it’s stunning,” said CBRE broker Bill Cumbelich, who is leasing the Sears building.

Bay Meadows in San Mateo also has its first office building under construction, while Bishop Ranch in San Ramon has 1 million square feet up for grabs. Daly City’s DC Station has space available, too. Still, cities in northern San Mateo County and the Tri-Valley haven’t been gotten down to single-digit vacancy rates.

“The market is getting very tight for large blocks of space and almost all of it is a result of local expansion, not San Francisco spillover,” said Bill Nork of Newmark Cornish & Carey. “Everyone was hoping, but it didn’t happen.”
Wait ’till this year?

5 key events from 2014

Salesforce dominates: Salesforce was ready to drive into Mission Bay office space when it hit the brakes. Instead, S.F.’s largest tech tenant made two huge office plays. First, it took 714,000 square feet in a Transbay tower. Later, it paid $640 million for the 50 Fremont tower.

Mission Bay’s tech future: There are about 300 acres in the Mission Bay neighborhood, and 30 of them could change the place’s whole dynamic. Uber announced it will build its headquarters there, while Kilroy Realty Corp. sketched plans for a new tech haven and the Golden State Warriors plotted office buildings next to its new arena. The turn toward tech offices could alter the identity of Mission Bay as a research hub.

Big plays for tech on the Peninsula and in East Bay: Four major office developments outside of San Francisco opened up over 2 million square feet of space geared toward tech tenants: the Sears building in Oakland, Bay Meadows in San Mateo, Bishop Ranch in San Ramon and DC Station in Daly City.

Rent gets too high for nonprofits: Increasing office rents, gentrifying neighborhoods and cheaper space in Oakland has created an exodus across the Bay for nonprofits. According to a city report, half of the city’s nonprofits left between 2011 and 2013 as rents have doubled to more than $50 a square foot in the last few years.

Redwood City’s emergence: The southern Peninsula city’s office market has the second-lowest vacancy and the second-highest rents in San Mateo County thanks in part to big plays by Google and Box this year. First, Box locked up 334,000 square feet at Crossing/900. Then, Google inked 934,000 square feet at Pacific Shores. Developers have since flooded the city with new proposals to build offices.

Link to article:
SF Office Spillover

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.”


3130 20th Street is now available for lease. 3130 20th Street is centrally located in the Mission District just a few blocks from BART, countless shops and restaurants. The 13,850+/- square feet that is available can be divided into three spaces (9,000+/- main PDR space; 3,250+/- separate PDR space; and 1,600+/- SF of auxiliary warehouse). The spaces will be available on or about January 1, 2015 @ $2.25 psf./$27.00 annual.

For more information on this space, our other available listings or San Francisco real estate market conditions, call 415.970.0000.

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3130 20th Street Property Brochure