There hasn’t been this much empty office space in San Francisco since 2011.
The vacancy rate hit 14.1 percent in the third quarter, nearly three times what it was a year ago, according to the San Francisco Chronicle, citing Cushman & Wakefield.
Several major Bay Area employers have embraced remote working since the pandemic forced offices to close this spring. San Francisco-based Twitter announced earlier this year that employees could work from home indefinitely, while Google and Facebook are allowing remote working through the end of the year at least.
For the first time, sublease vacancy —at 7.4 percent — accounted for the majority of overall vacancy. Credit Karma, Dropbox and Twitter have all listed space for sublease. Los Angeles County saw a record amount of sublease office space hit the market in the second quarter and Chicago’s numbers are also way up.
Employers could be seeing an opportunity to reduce costs. Or, the vacancy rise could indicate a longer-term pivot away from large office footprints because of an increase in remote working or plans to decentralize to suburban markets.
Unsurprisingly, San Francisco rents are falling. Rents prices in the city were down 5.9 percent from the second quarter to $78.45 per square foot, according to the report. For context, rents fell 63 percent in the wake of the dot-com bust and 27 percent over the course of the Great Recession.
Only about 385,000 square feet of new leases were signed from July through September, down from around 421,000 square feet in the second quarter. In the third quarter of 2019, that number stood at 1.7 million square feet of new signed leases. There were no major leases signed in the most recent quarter, which saw Pinterest cancel a 490,000-square-foot lease at a planned Alexandria Real Estate Equities development. [SFC] — Dennis Lynch
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