Q4
2015
TRI Commercial Real Estate Services
SAN FRANCISCO TRENDS
Subleases Increasing...
OUTLOOK - 2016
MARKET OVERVIEW
The U.S. economy has been expanding
and our local market is riding the top of
this crest with high employment. In the
largely tech-anchored San Francisco office sector, ji ers in the capital markets
may signal valua on correc ons and
funding reduc ons. This in turn will force
unprofitable companies to shed space,
and building valua ons to drop. However, with the pent-up tech demand, high
rents and ght availability should con nue well into 2016.
The San Francisco Office Market ended 2015 with a posi ve absorp on of approximately 1.4 million square feet, as compared to last year’s 2.6 million square feet of
posi ve absorp on. The tech sector again dominated the absorp on with its appe te for South of Market loca ons. Citywide direct vacancy rate for year-end was
3.9%, as compared to 5.9% at the end of 2014.
There are conflic ng signals as to when
the market will correct. Historically, past
market correc ons in 2000 and 2008
were preceded by an increase in sublet
spaces. We began to see such indica ons
at the end of the 4th Quarter, with approximately 5 million square feet of sublease space coming back on the market;
Dropbox sublet half of their China Basin
space, and Twi er sublet an en re floor
at their Mid-Market building. In addi on,
Crescent Heights is walking away from
building their 750-foot skyscraper at the
Transbay Transit Center.
In the Downtown Core, available direct vacant space reduced to 4.6% (2.5 million
square feet), as compared to 6.1% (3.4 million square feet) in the previous quarter.
Class A average direct asking rates remained in the high $60’s - low $70’s; Class B in
the high $50’s - low $60’s.
Large transac ons done in the 4th Quarter included S tch Fix’s 95,250 square feet
at One Montgomery, moving into the space vacated by LinkedIn and John Wiley.
Collec ve Health signed 52,999 square feet for the remaining space at 85 Bluxome,
occupying the en re building. Regus renewed 43,194 square feet at One Market.
DoubleDutch signed 35,834 square feet at 350 Rhode Island, moving from their
2601 Mission loca on. Degenkolb Engineers signed 22,536 square feet at 375 Beale
and S tch Labs signed 22,294 square feet at 984 Folsom, taking the en re building.
TripAdvisor took over Udemy’s previous space of 20,579 square feet at 360 Third.
Completed projects in the 4th Quarter included: 222 Second, 350 Mission, 333 Brannan and 345 Brannan for a total of about 1.2 million square feet. Deliveries in 2016
are es mated at about 1.1 million square feet of new office space and another 1.4
million square feet for 2017.
Downtown Core is North & South Financial Submarkets; Mid-Market is the area bordered by Civic Center to the
north, Union Square to the east, Howard Street to the south and Van Ness to the west. SoMa is the area bordered by Market Street to the north, 6th Street to the east, Bryant Street to the south and 12th Street to the west.
ABSORPTION - SAN FRANCISCO OFFICE MARKET
In Summary:
+
4th Quarter ACTIVITY
Positive net absorption of approximately 1.4 million square feet at
year-end 2015
Class A direct asking rates in the
+ high
$60’s - low $70’s
+
Class B direct asking rates in the
mid-high $50’s - low $60’s
Direct vacant available - Downtown
+ Core
at 4.6%; Citywide at 3.9%
100 Pine Street, Suite 1000
San Francisco, CA 94111
www.tricommercial.com
The information above was obtained from sources we deem reliable; however, no warranty or representation,
expressed or implied, is made as to the accuracy of the information contained herein.
Building Great Relationships
Q4
2015
Q4 LARGE SALE TRANSACTIONS
Q4 MAJOR LEASE TRANSACTIONS
Tenant
Stitch Fix
Collective Health
Regus
DoubleDutch
BBVA Compass
Davis, Wright & Tremaine
Degenkolb Engineers
Stitch Labs
TripAdvisor
Forrester Research
Alliance Bernstein
Social Code
Expedite Financial
Stratacache
Popsugar Inc.
Address
One Montgomery
85 Bluxome
One Market
350 Rhode Island
201 Mission
505 Montgomery
375 Beale
984 Folsom
360 Third
150 Spear
555 Califorinia
116 Montgomery
222 Sutter
600 Montgomery
111 Sutter
Sq.Ft.
Buyer
95,250
52,999
43,194
35,834
34,350
30,120
22,536
22,294
20,597
19,036
17,884
14,833
14,811
13,243
12,893
Tishman Speyer
TA Realty
L&B Realty Adv
Acadia
Market Street Cap.
Hekemian Group
333 Bush
250 Montgomery
20 California
1360 Mission
982 Market
828 Brannan
GS Warriors
Land Sales
Mission Bay 12-acre $155.1 Million
DOWNTOWN CORE CLASS A VACANCY & RENTAL RATES
Address
Price
Per Sq.Ft.
$ 380.0 Million
$ 74.7 Million
$ 44.0 Million
$ 18.1 Million
$ 15.5 Million
$ 9.9 Million
$
$
$
$
$
$
700
630
739
531
429
579
$ 173
DOWNTOWN CORE CLASS B VACANCY & VACANCY RATES
y
Note:
Rental rates based on COSTAR data on the above charts are lower than actual market rental rates due to averaging of undisclosed “negotiated rents.”
Graph is based on Vacant Direct space; Vacant Direct Available space is what is actually on the market for lease.
SUBMARKET STATISTICS
Submarket
Financial District
South Financial District
Yerba Buena
Rincon/South Beach
Jackson Square
Union Square
Mid-Market
Civic Center
Van Ness Corridor
Waterfront/North Beach
South of Market
Showplace Square
Potrero East/West of 101 Fwy
Mission Bay/China Basin
Net Rentable Area
(sq.ft.)
29,758,346
27,883,923
3,566,813
5,837,306
3,109,240
5,422,569
7,080,222
4,258,705
3,345,789
4,372,165
2,067,550
3,253,091
2,153,480
3,282,963
QTR Absorption
(114,113)
242,976
9,456
113,152
(29,066)
(15,114)
(95,012)
0
(18,301)
33,307
43,471
(180,261)
47,963
27,788
Vacant Dir.
(%)
6.9
7.6
6.6
9.4
4.3
4.7
2.6
1.7
4.9
6.6
0.8
9.9
1.1
5.7
Vacant Dir. Avail.
(%)
5.8
3.2
4.0
2.5
3.4
4.3
2.4
1.7
3.6
5.6
0.8
7.3
0.8
5.4
*Total direct available is not necessarily all vacant, as some of the space may be occupied and available on a 30-120 day notice or proposed space.
The information above was obtained from sources we deem reliable; however, no warranty or representation, expressed or implied, is made as to the accuracy of the information contained herein.
100 Pine Street, Suite 1000, San Francisco, CA 94111
www.tricommercial.com
Building Great Relationships
Produced by the TRI COMMERCIAL Research Department