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The Bay Area Real Estate Journal
San Francisco Office Tenants Continue to Give Back Space in Gobs
Submitted June 26, 2009
Vacant space again flooded the San Francisco office market in the second quarter, pushing the so-called availability rate to 20.2 percent, according to data released June 26 by CB Richard Ellis.
It is the first time that the availability rate in the city has pushed above the 20 percent threshold since the dark days of the dot-com bust, the commercial brokerage said. “It is also likely that the city will soon surpass its all-time high availability rate of 20.6 percent witnessed in the first quarter of 2003,” the report concluded.
The availability rate, in contrast to the vacancy rate, includes space that a tenant will vacate but hasn’t yet. The city’s office vacancy rate at the end of the quarter was 14.7 percent, CBRE said.
The market saw more than 1.8 million square feet of negative net absorption in the first six months of the year. That’s the amount of office space that has come back to market above what was leased. That compares to just more than 2 million square feet of negative net absorption in all of 2008.
Not surprisingly, average asking rents are in decline, falling more than 5 percent to $34 a square foot a year for direct, full-service space.
The strongest markets are Union Square, Potrero Hill and the South Financial District, all of which have availability rates of less than 16 percent. The weakest markets are Yerba Buena and Multimedia Gulch, both of which have availability rates of nearly 30 percent, according to CBRE.
Meanwhile, conditions on the Interstate 680 corridor from Concord, Martinez and Pleasant Hill to Walnut Creek, Pleasanton and Livermore also continued to deteriorate, though the rate of deterioration appears to be slowing. The market did see 336,000 square feet of negative net absorption in the second quarter, but that was far better than the 1 million square feet of negative net absorption in the first three months of the year, CBRE said.
The vacancy rate at the quarter’s end was 15.6 percent; the availability rate was 18 percent.
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