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San Francisco office leasing in the 3rd Quarter of 2015 has seen continued demand for office space. Creative spaces still lead the rental market, with SOMA and Mid-Market continuing to be hot spots.
San Francisco’s Class A traditional office space in the North Financial District is in the low $60's for rent, meanwhile creative office spaces South of Market and near Mid-Market (Twitter), are achieving rents $15 to $30 per foot more for creative office spaces. This means there are $80 rent deals being completed. There were 2 deals completed on the 10th floor of 201 Spear Street at $82/ft effective rent. Both deals had close to $80/ft in TI's (Tenant Improvements). Another recent example of NOMA being less expensive than SOMA is the firm NRG, who inked the largest NOMA lease deal of 2015.
San Francisco’s job growth continues to be strong, with many large companies looking for office space in the Bay Area. San Francisco's office space demand is still at an all-time high, but the relief valve of the East Bay, specifically around the 12th Street and 19th Street BART stations, has many firms looking for a cheaper alternative.
So with all the demand....where is the supply? There are currently over 4 million feet of office space being built in San Francisco. However, approximately 3 million of it is already leased. Salesforce, LinkedIn, and several other tech giants have preleased much of the space in the pipeline already. One question that keeps coming up is "What about all the firms moving out of SF?” Schwab recently announced 1,000 jobs were moving out of San Francisco and into Texas. Another local giant GAP has recently said that it will be laying off workers at their San Francisco HQ office.
With firms leaving for Oakland, Texas and other markets, doesn't this create some relief for office tenants in San Francisco? Unfortunately for office users, with such a high level of demand from larger firms, there is no relief from the demand for San Francisco office space at this point.
There is usually a flurry of office leasing activity in San Francisco once the summer is over, the kids are back in school, and everyone is at their desk trying to get as much accomplished before the holidays. Stay tuned for our complete 3rd Quarter Report coming out next month to see where the San Francisco office market is heading.