San Francisco: Commercial Real Estate, Office Space Trends and Statistics
The city of San Francisco is one of the top business hubs in the Americas. The local business community is among the most vibrant and successful at global level, partly due to the huge pool of talent available in the city and its surrounding areas. A large number of Fortune 500 companies are based in the area, and business opportunities exist for enterprises operating in a wide range of sectors, from aerospace to health care and including electronics, consumer goods, retail, and telecommunications.
The undeniable appeal of San Francisco as a business location has attracted hundreds of prospective entrepreneurs to the area. If you are considering setting up a business in San Francisco, take a look at our detailed guide to commercial property in this thriving Californian city.
Key Trends in the San Francisco CRE Market
For the past two years, the local commercial property market in San Francisco has shown a variety of healthy indicators.
Activity in this market sector has been largely driven by a strong labor market. According to researchers at Cushman and Wakefield, the local job market has been experiencing average increases of 2.6 per cent over the last two years. The vast majority of jobs that are being made available are in industry sectors like business and professional services, as in the last 12 months nearly 9,000 jobs were created in these sectors. In turn, this has prompted the rise of lease and sale transactions for mid-range properties of between 265,000 and 400,000 square feet.
Another noteworthy trend that has characterized the San Francisco commercial property market entail the high levels of foreign investment. In fact, the most recent AFIRE survey has shown that the local market is among the world’s top three in terms of its investment appeal. The majority of foreign capital that is being injected in local commercial properties comes from Asian and Northern European investors. Demand for new commercial properties is so high that the most significant new developments due to be delivered in 2015 have already been pre-leased.
Office Space in San Francisco
The San Francisco office market enjoys a healthy status. Over the past year, activity levels in this buoyant market have been driven by occupiers and tenants in industry sectors like information technology, professional and business services, finance, and insurance. The IT sector alone was responsible for nearly 9 million square feet worth of transactions during 2014.
Take-up rates, leading activity levels, and rental values have reached (and in some cases have exceeded) pre-recession levels, and market analysts predict that these indicators will continue their upward trend in the months to come. Vacancy rates citywide are in the region of 8.3 per cent, a record-low figure that had not been reached since 2001. The lowest vacancy rates are in Mission Bay, Union Square, West SOMA, and Presidio, whereas the highest are in Showplace Square, North Waterfront, and Civic Center. There is high demand for city center offices of 50,000 square feet and above, but availability for this type of properties is rapidly decreasing.
Average rental values continue to rise across all city areas. The latest surveys show that average asking prices for Class A office space are $62 per square foot, which represents an 11.4 per cent increase over last year’s values. The most expensive rental rates belong to properties within San Francisco’s financial district, where office floor space is going for anything between $60 and $63.7 per square foot. At the other side of the spectrum we have office properties along the Van Ness corridor ($42.5/sq ft), West SOMA ($44/sq ft), North Waterfront ($45.3/sq ft), and Potretro Hill/Mission Bay ($47.4/sq ft). Outside of the financial district, the most expensive offices are in Presidio ($63/sq ft), East Soma ($61/sq ft), and Jackson Square ($55/sq ft).
If you are looking for office space in San Francisco have a look at the executive suites currently available on Offices.net.