If you are like me, B'game is the center of your universe. It's also pretty much the geographic center of the "Bay Area". I use the quotation marks because "Bay Area" sometimes refers to some pretty distant places--all the way to the Delta. But from where we sit, the two biggest commercial centers- EssEff and Silicon Valley--bookend us precisely. The Wall Street Journal is keeping an eye on commercial space in both places and the headline is San Francisco's Office Market Cools as Startups Retreat. Here are a couple of data points
For the past decade, San Francisco has outshined Silicon Valley in attracting new technology firms, entrepreneurs and younger employees, who tend to prefer the city’s lifestyle and attractions to the suburbs. (Note: we shall see how long that lasts)
Now, that trend shows signs of reversing. Office demand has been falling in both markets, as the coronavirus pandemic, slowing economy and the early success of work from home have caused firms to reconsider office use. But San Francisco landlords have suffered more than their Silicon Valley counterparts in nearby cities such as Palo Alto, Menlo Park and Santa Clara.
Commercial real-estate firm CBRE Group Inc. said the volume of tenants looking for space has fallen about 56% in San Francisco, compared with about 32% in Silicon Valley, between the end of February and the end of May. San Francisco now has the highest sublease availability in the country, with about 30% of the available space in the city being listed by tenants, according to data firm CoStar Inc. “It’s likely sublease space will continue to flood the market in the year ahead,” CoStar said in a report.
The piece goes on to make the point that Silicon Valley is more stable due to less reliance on startups and more on larger companies with better balance sheets. My limited chats with people working for Valley companies jives with the market chatter that says "Hey, this working at home thing is pretty good". I think the trend is solid and will result in some changes to the B'game residential profile. More on that in the coming week.
Wow. When I wrote the "Note" yesterday "we shall see how long that lasts" about younger employees preferring the city lifestyle I had no idea the SF Comicle would back me up the next day. Here's today front-page, above the fold piece:
SF tenants break leases in startling numbers, giving renters upper hand
One in 13 San Francisco renters have broken their lease since the coronavirus stay-home orders went into place nearly 100 days ago, an astonishing out-migration of tenants in the city that could lead to thousands of empty rental units and give renters the upper hand in negotiations.
A new survey from the San Francisco Apartment Association found that 7.5% of renters have broken their lease over the last three months. The survey included information from 292 landlords who own 10,329 apartments, about 6% of the city’s total rental units. “We don’t have a baseline to compare it to, but I think it’s shockingly high,” said Charley Goss, the association’s policy director. “A pretty substantial group of people are leaving.”
The biggest group of tenants breaking leases in San Francisco are Gen Z workers, those 18 to 25 years old, according to landlord and tenants groups.
“What is getting hit the hardest is the new construction in SoMa, Mission Bay and South Beach,” he said. “Mission Bay is really suffering because there is not much of a neighborhood there yet. It’s become a little bit of a ghost town.”
Rent declines in less dense parts of the city — older neighborhoods likely to have outdoor space and more room to work from home — are not as steep.
https://www.sfchronicle.com/business/article/SF-tenants-break-leases-in-startling-numbers-15347851.php
Posted by: Joe | June 18, 2020 at 12:50 PM
I am absolutely certain all those millennials moving back in with mom and dad from South Beach will immediately re-register to vote at their parent's address so their mailed ballots will be correct and can be harvested properly. Certain.
Posted by: Growling Tiger | June 20, 2020 at 12:48 PM
SF's downtown doom loop isn't going away anytime soon. Original post was 3 years ago. From today's WSJ:
Fire Sale: $300 Million San Francisco Office Tower, Mostly Empty. Open to Offers.
One building, a 22-story glass and stone tower at 350 California Street, was worth around $300 million in 2019, according to office broker estimates.
That building now is for sale, with bids due soon. They are expected to come in at about $60 million, commercial real-estate brokers say. That’s an 80% decline in value in just four years.
Many of the city’s most prominent corporate tenants, from Salesforce Inc. to Facebook parent Meta Platforms Inc., are flooding the office market with space for sublet rather than waiting for their leases to expire.
Nearly 30% of San Francisco’s office space is vacant, which is more than seven times the rate before the pandemic hit, and the biggest increase of any major U.S. city, according to commercial real estate services firm CBRE Group Inc.
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When will the state re-forecast their ridiculous housing numbers being foisted on every city in the state and backed with Bonta's arm-twisting? Asking for London Breed.
Posted by: Joe Baylock | April 27, 2023 at 06:43 PM