The San Francisco office lease market story is all too familiar. Businesses are suffering. Unemployment is rising. Vacancies are mounting. But what exactly is happening? How does this affect you and your clients? When is it going to get better? Now, more than ever, a big spreadsheet, different sources of data, and a healthy dose of critical thinking is key.
According to Colliers’ Q4 2008 SF Office Market Report, “The City posted 766,464 square feet of negative absorption during the fourth quarter… Softening market conditions triggered a drop in average effective rental rates… Looking ahead, average rental rates will decrease, albeit at a slower pace. The influx of sublease space forecasted to hit the market will continue the downward pressure on rental rates. ” Read the full report.
CBRE’s Bay Area Market Outlook for Q4 2008 is equally bearish. “The increase in unoccupied space has led to a willingness on the part of owners to drop asking rates significantly. As net absorption for the year surpassed two million sq. ft., owners dropped asking rates by more than 6% during the quarter, the steepest quarterly decline in more than five years. Despite the drop in published rates, the delta between asking and signing rates appears to have widened further as owners trade lower rents for the stability of longer term occupancy.” Read the full report (registration required).
At LoopNet, we’ve been looking at ways to provide more data to give you context to what you’re seeing on the market. Being the leading online marketplace for commercial real estate, we generate quite a bit of activity from both searchers and listers that can yield valuable insight into the state of the CRE market. We already have Investment Market Reports you can purchase and LoopLocal Insight Reports for Premium Members looking for trends on the sale side but we think there is more that can be done.
Here’s a chart of the monthly average asking rental rate for office spaces for lease in San Francisco, CA for the last 26 months:
Looking at the most recent month, Feb 2009 average asking rental rates are down 13% YOY.
Keep in mind this is only LoopNet data and may not reflect the overall market but that’s why we wanted to share this chart with you. Do you find this information is useful as another data point to consider? If not, what can we do to improve it? Where do you currently get reliable market data? What other charts would you like to see? Average time on market? Searcher demand? Post a comment below and we’ll see what we can do!