It Starts: San Francisco Office Boom Deflates, but Fitch Says It’s ‘Unlikely to Collapse’ this Time

Jon Blogosphere, Market Commentary, Real Estate

Other tech-heavy office markets too.
For some time, we’ve heard through the rumor mill that commercial real estate brokers in San Francisco are getting nervous. Then Savillis Studley released its report on the San Francisco office market for the fourth quarter. A very mixed bag for the first time since 2009. And now even Fitch Ratings is getting antsy.
‘Overall vacant availability posted its first material increase since 2009, rising by 0.6 percentage points to 8.0%,’ Savillis Studley reported for Q4. ‘The Class A rate spiked by 0.8 pp to 8.5%.’ And worse: ‘More sublet space hit the market.’
A prominent sublet space to hit the market is an entire floor at Twitter’s headquarters. Twitter has been laying off, and it won’t need this space. This comes after Twitter abandoned plans to lease an additional 100,000 square feet at the nearby headquarters of Square, the other company where Twitter CEO Jack Dorsey is the CEO. Those 100,000 sf then came on the market as well.
Yet, according to Savillis Studley, overall asking rent in Q4 ‘spiked’ 14.1% year-over-year to $63.87 per square foot. Class A asking rent ‘jumped’ 11.7% to $65.94 per square foot.

This post was published at Wolf Street by Matt Badiali – March 22, 2016.