April 6, 2017
The San Francisco office market experienced a strong start to 2017, with increases in leasing activity and tenant demand. The latest research by Newmark Cornish & Carey (NCC) shows strong demand, combined with limited availability of turnkey creative space, applied upward pressure on asking rents, even though overall availability and vacancy increased slightly.
Landlords continued to offer more concessions and greater tenant improvement allowances, particularly for traditional and second- generation space.
Interestingly, rents in SoMa appeared to drop, though NCC reports they actually have been consistently rising, a discrepancy explained by a simultaneous drop in available space in the more expensive SoMa submarkets, and an increase in the less expensive sub-submarkets.
Other key findings of NCC’s office report include:
- Leasing in Q1 2017 was at the greatest volume since the first quarter of 2015
- Tenant demand rebounded to 6.2 million square feet, after dipping below 5.0 million square feet at the end of 2016
- Vacancy rate increased to 6.2% from 5.8% Q4 2016
- Annual direct asking rates rose slightly to $70.66/SF
- More than 4.2 million square feet is expected to deliver in 2017, and 48.1% of deliveries are pre-leased
For comments, questions or concerns, please contact Dennis Kaiser