san francisco office market report q4, 2009
DESCRIPTION
In depth analysis of the San Francisco office market in Q4, 2009TRANSCRIPT
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Fourth Quarter • San Francisco • Office Report SAN FRANCISCO OFFICE
Lic #00832933 One Bush Street, Suite 400 • San Francisco, CA 94104
Tel: 415.445.8888 • Fax: 415.445.8886 www.ccarey.com
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Cornish & Carey Commercial San Francisco Quarterly Report is based on a quarterly survey of competitive office buildings. The data included in this report incorporates not only space presently available on the market, but also space which we have been led to believe will come onto the market in the foreseeable future. Information contained herein has been given to us by the owner of the property or other sources we deem reliable. We have no reason to doubt its accuracy, but make no guarantee, warranty or representation about it. All information should be verified prior to lease or purchase.
SAN FRANCISCO OFFICE • FOURTH QUARTER
TABLE OF CONTENTS
Coverage Map 1
San Francisco Market Overview 2
San Francisco Market Summary 3
San Francisco Market Highlights 4
C&C Focus 6
North Financial District Market Summary 8
South Financial District Market Summary 10
North Waterfront / Jackson Square Market Summary 12
Van Ness / Civic Center Market Summary 13
Union Square Market Summary 14
SoMa Market Summary 15
Agent Roster 18
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SAN FRANCISCO OFFICE • FOURTH QUARTER
COVERAGE MAP
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SAN FRANCISCO OFFICE • FOURTH QUARTER
OFFICE UPDATE AND Q4 2009 IN REVIEW
By: Ryan Carmichael, Financial Analyst / Market Research Coordinator The cautious expectations with which the San Francisco office market began 2009 were validated at year’s end by increased vacancy, decreased rental rates and depressed property values; leaving everyone to wonder, “Where is the bottom and when will it appear?” The largest financial melt down since the Great Depression took its toll on the San Francisco office market, causing business conditions to deteriorate across all industry sectors. Weakened professional services and declining consumer spending elevated San Francisco’s unemployment rate to 10.2 percent in August (its highest point in 2009), however since then unemployment has receded to 9.7 percent (as of November), hinting at economic stabilization. After seeing slight blip of positive absorption in the third quarter, the San Francisco office market - continuing the trend of 2009 – pulled back and recorded 366,965 square feet of negative net absorption in the final quarter. This pushed the overall citywide vacancy rate to 14.8 percent from Q3’s mark of 14.4 percent, recording yet another vacancy high-water mark since the dotcom crash nearly a decade ago. The California State Automobile Association (CSAA) was the largest contributor to the negative absorption in the fourth quarter when it moved the last of its employees to its new campus in the East Bay. This was not a surprise to the market as it was in the plan disclosed over two years ago. However there are limited requirements over 100,000 square feet in the Civic Center submarket, which suggest that the high 17.6 percent vacancy rate may be an issue for this, and other tertiary market, for a while. Asking rents for class A trophy buildings, nearly $85 per square foot gross in late 2007, were approximately $50 per square foot gross on average at the end of 2009. This tranche of the market, however, has benefited from the traditional “flight to quality”, as tenants upgrade to better view-space. The CBD market has kept vacancy rates in check at 12.3 percent. Many of the largest lease transactions of 2009 came in
the form of space upgrades, including Del Monte committing to space at One Maritime, moving from The Landmark Building at One Market, Medivation moving from 201 California Street into Hills Plaza, as well as Silicon Valley Bank and AT Kearny, both of which have committed to space at Tishman Speyer’s 555 Mission Street. Citywide, the amount of available sublease space (currently just over 2.1 million square feet) has decreased to its lowest point of 2009. The accumulation of available sublease space which started in the beginning of 2009, has been eroded by companies capitalizing on economical downtown office space. Law firm Novak, Druce, Quigg LLP took advantage of the heavily discounted sublease space in the CBD when it subleased Sequoia Capital’s top-floor space at Tishman Speyer’s 555 Mission Street. The decline in sublease space has been in part due to tenants focusing on shorter term leases as well. Total leasing velocity picked up over the second half of the year, however San Francisco recorded a modest 4.1 million square feet of gross leasing activity in 2009 - compared to 4.4 million square feet and 7.1 million square feet in 2008 and 2007 respectively. The drop in activity is due to economic recession, which has forced companies of all sizes revisit occupancy needs, resulting in downsizing or dissolution. As vacancy continues to rise, tenant retention has become priority number one for landlords. Helping tenants adjust to a struggling economy by taking space back – but maintaining occupancy levels, is par for the course for today’s building ownership. Levi’s Strauss & Co. was able to renew its lease of 354,797 square feet at 1155 Battery Street as well as decrease its overall footprint by 181,469 square feet. With tenant demand waning and existing companies seeking to shed excess space, the San Francisco office market will continue to limp through the recession. Company downsizing will elevate vacancy suppressing rental rates. Due to a “flight to
quality”, view-space in San Francisco’s CBD has experienced increased occupancy rates. As this trend continues into 2010 we expect asking rates in this segment of the market to firm up. Furthermore, should liquidity increase in 2010, near term defaults, foreclosures, and work-outs will bring new opportunity for equity which has been patiently waiting on the sidelines, spurring a re-growth for the San Francisco office market.
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SAN FRANCISCO OFFICE • FOURTH QUARTER
OFFICE MARKET HIGHLIGHTS - LEASING
2009 2009
Submarket Net Rentable Area * Vacancy Total Vacancy 3 Total Availability Class A Class B Class C Q4 Net Absorption 2 Y-T-DNorth Financial District 28,691,601 4,127,644 14.39% 19.50% $35.40 $28.00 $23.00 (10,742) (602,556)South Financial District 24,749,615 2,471,753 9.99% 13.66% $35.30 $28.00 $23.00 100,217 (83,039)North Waterfront/Jackson Sq. 6,840,596 710,388 10.38% 16.02% $30.70 $27.00 $24.00 12,037 (195,863)Van Ness/Civic Center 6,817,902 1,205,878 17.69% 18.96% $29.27 $25.00 $23.00 (556,315) (743,647)Union Square 5,974,749 682,098 11.42% 18.05% $30.00 $28.00 $24.00 (15,298) 31,858SoMa** 10,649,245 3,228,319 30.32% 30.32% $30.30 $27.00 $24.00 106,824 (824,885)San Francisco Office Market 83,723,708 12,426,080 14.84% 18.72% $34.64 $27.26 $23.75 (363,277) (2,418,132)** SoMa Inventory includes the following markets: South of the Market; Yerba Buena; Multimedia Gulch; Mission Bay; South Beach; Inner Mission & Potrero Hill
Average Asking Rate 1
Historical Trends
Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental RatesQ4 44,794,249 4,644,515 1,246,239 13.2% 303,271 $33.40
2006/Q1 45,181,682 3,802,372 717,040 10.0% 283,495 $33.46Q2 45,265,952 3,899,723 692,683 10.1% 111,350 $35.27Q3 45,267,770 3,412,272 583,281 8.8% 213,537 $35.88Q4 45,278,227 3,224,700 643,023 8.5% 210,841 $36.80
2007/Q1 46,668,376 3,422,734 441,075 8.3% 91,954 $42.02Q2 46,663,509 3,286,066 487,191 8.1% 92,522 $43.32Q3 46,663,509 3,083,395 355,421 7.4% 240,597 $46.82Q4 46,663,509 2,976,387 352,776 7.1% 154,149 $46.82
2008/Q1 47,322,203 2,754,242 365,733 6.6% 209,188 $46.91Q2 47,595,475 3,243,799 393,792 7.6% (517,616) $46.94Q3 47,595,475 3,448,110 744,607 8.8% (555,126) $44.07Q4 48,151,794 4,587,686 841,335 11.3% (1,236,304) $41.26
2009/Q1 48,219,559 4,968,642 1,122,238 12.6% (661,859) $37.02Q2 48,219,559 5,009,042 1,273,766 13.0% (190,864) $35.49Q3 48,219,559 4,995,774 1,178,876 12.8% 108,158 $34.64Q4 48,219,559 5,439,820 962,606 13.3% (227,776) $34.64
HISTORICAL VACANCY VS. LEASE RATES
1 Rates are Quoted as Full Service 2 Absorption is based on vacant square footage 3 Vacancy is based on vacant square footage * Includes all Classes of Office Space
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SAN FRANCISCO OFFICE • FOURTH QUARTER
OFFICE MARKET HIGHLIGHTS - LEASING
Levi’s Plaza (1155 Battery Street)
BY THE NUMBERS
±354,797 Square feet Levi’s Strauss renewed at Levi’s Plaza. The transaction is a consolidation from three building to one, reducing the San Francisco retailer’s overall footprint by 181,469 square feet.
Significant Leases (By Square Foot) Top Leases for 2009
Tenant Lessor (Sublessor) Address Sq. Ft.
Levi Strauss & Co. ( R ) Levi Strauss Associates 1155 Battery Street 354,797
Morgan Lewis ( R ) Morgan Stanley 1 Market Plaza (Spear Tower) 153,000
Del Monte Foods Morgan Stanley 1 Maritime Plaza 152,917
Reed Smith LLP Hines 101 Second Street 109,994
Medivation Morgan Stanley (PPF) 345 Spear Street 63,970
Credit Suisse ( R ) AEW Capital Management 650 California Street 62,139
Brown & Toland ( R ) American Assets, Inc. 153 Townsend Street 51,871
Ropes & Gray ( R ) Boston Properties 3 Embarcadero Center 50,000
Duane Morris ( R ) Paramount/ Morgan Stanley 1 Market Plaza (Spear Tower) 49,847
Cooper, White & Cooper LLP ( R ) Glenborough Realty Trust Inc. 201 California Street 44,202
Top Leases for Q4 2009
Tenant Lessor (Sublessor) Address Sq. Ft.
Levi Strauss & Co. ( R ) Levi Strauss Associates 1155 Battery Street 354,797
Del Monte Foods Morgan Stanley 1 Maritime Plaza 152,917
Medivation Morgan Stanley (PPF) 345 Spear Street 63,970
Credit Suisse ( R ) AEW Capital Management 650 California Street 62,139
Ropes & Gray ( R ) Boston Properties 3 Embarcadero Center 50,000
Cooper, White & Cooper LLP ( R ) Glenborough Realty Trust Inc. 201 California Street 44,202
Foley & Lardner LLP Vornado Realty Trust 555 California Street 30, 462
Top Pending Leases
Tenant Lessor (Sublessor) Address Sq. Ft.
Morrison Foerster ( R ) MetLife, Inc. 425 Market Street 250,000
Zynga CBRE Investors 500 Terry Francois Blvd. 130,000
Exploratorium Port of San Francisco Pier 15 & 17 100,000
Benefits Cosmetics SEB Immobilien 225 Bush Street 53,000
Goldman Sachs ( R ) Vornado Realty Trust 555 California Street 45,000
( S ) = Sublease ( R ) = Renewal
( E ) = Expansion ( C ) = Cornish & Carey Involvement
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SAN FRANCISCO OFFICE • FOURTH QUARTER
OFFICE MARKET HIGHLIGHTS- SALES
BY THE NUMBERS
550 Terry Francois Blvd. was purchased by GLL Real Estate Partners in November of 2009 for $379/s.f. The ±283,000 square foot HQ of the GAP Inc. was one of the few data points for San Francisco’s investment market in 2009. Tishman Speyer purchased the Mission Bay asset in November of 2005 for $171.1 million or $605/s.f.
550 Terry Francois Blvd.
Significant Sale Statistics (By Square Foot) Top Buildings Sales in 2009 (By Square Foot)
Building Sq. Ft. Seller Buyer
160 Spear Street 288,308 Legacy Partners Winthrop Realty Trust
550 Terry Francois Blvd 283,000 Tishman Speyer GLL Real Estate Partners
100 Harrison Street 150,000 100 Harrison Street Associates JMA Ventures
120 Howard Street (Note sale) 147,750 Prudential RE Investors Shorenstein Partners
250 Montgomery Street 116,078 Realty Finance Corporation OBO Lincoln Property Co. Argonaut Capital
562-566 Market Street 64,955 Genaro Mendoza Chelsea Pacific Holdings LLC
Top Buildings Sales in Q4 2009 (By Square Foot)
Building Sq. Ft. Seller Buyer
550 Terry Francois Blvd 283,000 Tishman Speyer GLL Real Estate Partners
120 Howard Street (Note sale) 147,750 Prudential Shorenstein Partners
Top Buildings for Sale (Over 50,000 Square Foot)
Building Sq. Ft. Seller Buyer
49 Stevenson Street 121,179 Core Fund Oak Brook Property, LLC TBD
Building Sq. Ft. Owner Location Completion Date Major Tenant
1 Kearny Street ( R ) ( E ) 94,000 Joseph & Maria Fang NFD Q4 2009 None
455 Mission Bay Blvd. 210,000 Alexandria Real Estate Mission Bay Q2 2010 Nektar Therapeutics, Inc.
Building Sq. Ft. Owner Location Status
222 Second St. 700,000 Tishman Speyer SFD Planning
350 Mission Street ( C ) 430,000 GLL Real Estate Partners SFD Planning / Marketing Space
350 Bush Street & 500 Pine Street 400,000 Lincoln Properties NFD On Hold
680 Folsom Street ( R ) 350,000 RREEF / CalPERS SFD On Hold
535 Mission Street 307,000 Beacon Capital Partners SFD On Hold
Piers 27-31 300,000 Shorenstein Company North Waterfront Planning
Foundry Square 3 197,000 Wilson Meany Sullivan SFD Approved / Marketing Space
Projects Under Construction (By Completion Date)
Projects Planned (By Square Footage)
( R ) = Renovation ( E ) = Expansion ( C ) = Cornish & Carey Involvement
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SAN FRANCISCO OFFICE • FOURTH QUARTER
C&C FOCUS – TIER 1, 2 & 3
Energy Star LEED – Certified LEED - Pending
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SAN FRANCISCO OFFICE • FOURTH QUARTER
C&C FOCUS – TIER 1, 2 & 3
Energy Star LEED – Certified LEED - Pending
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SAN FRANCISCO OFFICE • FOURTH QUARTER
NORTH FINANCIAL DISTRICT MARKET SUMMARY
4th Quarter, 2009
Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q3 '09 Rental Rates1A 21,546,720 14.5% 11.3% 3.1% 4,123,258 3,116,924 1,006,334 (8,559) (47,790) $35.40B 6,288,579 14.9% 14.0% 0.9% 1,373,128 1,261,735 111,393 (6,278) (77,527) $28.00C 856,302 8.6% 8.4% 0.2% 98,816 91,215 7,601 4,095 739 $23.00
28,691,601 14.39% 11.82% 2.56% 5,595,202 4,469,874 1,125,328 (10,742) (124,578)
Vacancy Rate Availability (SF) Net Absorption
Historical Trends
Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental Rates
Q4 19,817,460 1,922,272 637,961 14.5% 157,926 $34.31
2006/Q1 19,817,460 1,773,127 314,449 12.9% 243,229 $34.75
Q2 19,890,190 1,731,564 337,550 10.5% 108,358 $34.75
Q3 19,895,019 1,557,068 292,971 10.4% 51,837 $36.40
Q4 19,895,019 1,505,161 289,094 9.3% 225,615 $37.00
2007/Q1 20,968,597 1,703,435 202,698 9.0% (3,396) $37.60
Q2 20,968,597 1,654,847 268,598 9.1% (121,277) $43.24
Q3 20,968,597 1,381,444 181,956 9.2% (17,312) $45.15
Q4 20,968,597 1,252,588 177,665 7.5% 83,823 $48.30
2008/Q1 21,482,945 1,294,006 131,722 6.6% 55,817 $48.30
Q2 21,482,945 1,430,829 153,364 7.4% (134,611) $48.30
Q3 21,482,945 1,525,829 477,404 9.3% (286,019) $45.30
Q4 21,482,945 2,075,292 563,406 12.3% (480,054) $42.20
2009/Q1 21,546,720 2,189,346 733,855 13.6% (254,346) $37.98
Q2 21,546,720 2,215,344 844,216 14.2% (136,359) $36.30
Q3 21,546,720 2,320,104 787,246 14.4% (47,790) $35.40
Q4 21,546,720 2,437,999 677,910 14.5% (8,559) $35.40 HISTORICAL VACANCY VS. LEASE RATES
1 Rates are Quoted as Full Service
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SAN FRANCISCO OFFICE • FOURTH QUARTER
NORTH FINANCIAL DISTRICT MARKET SUMMARY
BY THE NUMBERS
±(602,556) Square feet of negative net absorption in the North Financial District.
±152,917 Square feet committed to by Del Monte at One Maritime Plaza. The company will move in April of 2011 and will occupy 7 floors.
At $35.40 Class “A” asking rates are beginning to firm up.
CLASS “A” HISTORICAL DIRECT VS. SUBLEASE VACANT SPACE
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SAN FRANCISCO OFFICE • FOURTH QUARTER
SOUTH FINANCIAL DISTRICT MARKET SUMMARY 4th Quarter, 2009
Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q3 '09 Rental Rates1A 20,181,060 10.7% 9.7% 1.0% 2,828,249 2,471,487 356,762 80,375 145,018 $35.30B 3,346,323 5.7% 5.4% 0.3% 401,558 390,489 11,069 16,278 29,810 $28.00C 1,222,232 10.0% 10.0% 0.0% 151,162 144,964 6,198 3,564 (25,885) $23.00
24,749,615 9.99% 9.18% 0.81% 3,380,969 3,006,940 374,029 100,217 148,943
Vacancy Rate Availability (SF) Net Absorption
Historical Trends
Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental Rates
Q4 19,772,060 1,934,028 477,212 12.2% (38,490) $33.40
2006/Q1 20,159,493 1,328,836 358,395 8.4% 63,342 $33.40
Q2 19,086,992 1,354,408 325,959 8.8% 41,720 $35.70
Q3 19,094,438 1,271,296 257,646 8.0% (70,444) $36.00
Q4 19,094,438 1,038,200 262,045 6.8% 228,697 $37.10
2007/Q1 19,128,276 991,788 160,721 6.0% 252,536 $42.67
Q2 19,128,276 998,881 142,012 6.0% 13,586 $43.40
Q3 19,128,276 1,157,348 92,021 6.5% 114,922 $47.60
Q4 19,128,276 1,294,077 83,682 7.2% (128,390) $47.60
2008/Q1 19,612,763 1,064,770 149,049 6.2% (32,660) $47.60
Q2 19,612,763 1,153,898 158,734 6.7% 37,426 $47.60
Q3 19,612,763 1,357,040 187,752 7.9% (73,457) $44.20
Q4 20,169,082 1,977,938 203,342 10.8% (410,583) $41.50
2009/Q1 20,181,060 2,089,038 284,973 11.8% (237,133) $37.35
Q2 20,181,060 2,086,629 297,292 11.8% (9,910) $36.20
Q3 20,181,060 1,990,618 248,285 11.1% 145,018 $35.30
Q4 20,181,060 1,966,796 191,732 10.7% 80,375 $35.30 HISTORICAL VACANCY VS. LEASE RATES
1 Rates are Quoted as Full Service
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SAN FRANCISCO OFFICE • FOURTH QUARTER
SOUTH FINANCIAL DISTRICT MARKET SUMMARY
BY THE NUMBERS
±28,730 Square feet was sublet to Babcock & Brown Aircraft Management from Oracle at 525 Market Street.
100,217 Square feet of positive net absorption for all building classes represents the second consecutive quarter of positive absorption in the South Financial District. 9.9% overall vacancy rate in Q4 (includes sublease space and all building classes), a decline from Q3’s mark of 11.1%.
CLASS “A” HISTORICAL DIRECT VS. SUBLEASE VACANT SPACE
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SAN FRANCISCO OFFICE • FOURTH QUARTER
NORTH WATERFRONT/JACKSON SQUARE MARKET SUMMARY
BY THE NUMBERS
+62,584 Square feet lease was renewed by NorCal Insurance, Inc., at 560 Davis Street. 6,649 Square feet of positive net absorption for all building classes in the North Waterfront / Jackson Square submarket.
14.7% Class “A” vacancy for the North Waterfront / Jackson Square submarket, an increase from Q3’s mark of 12.8%.
4th Quarter, 2009
Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q3 '09 Rental Rates1A 1,670,725 14.7% 13.6% 1.1% 302,097 251,970 50,127 (32,365) 14,448 $30.70B 3,699,610 10.3% 9.7% 0.6% 634,188 577,911 56,277 40,002 (24,506) $27.00C 1,470,261 5.7% 5.7% 0.0% 159,826 125,349 34,477 (988) 37,838 $24.00
6,840,596 10.38% 9.77% 0.62% 1,096,111 955,230 140,881 6,649 27,780
Availability (SF)Vacancy Rate Net Absorption
CLASS “A” HISTORICAL VACANCY VS. LEASE RATES
1 Rates are Quoted as Full Service
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SAN FRANCISCO OFFICE • FOURTH QUARTER
VAN NESS/CIVIC CENTER MARKET SUMMARY
BY THE NUMBERS
+584,48 Square feet was vacated by th California State Automobile Association (CSAA) when it moved its headquarters to the East Bay in Q4. 21.1% Class “A” vacancy in the Van Ness/ Civic Center submarket, represnting a year-over-year increase of 18.5% $29.27 Per Square foot (Full Service) for Class “A” space, a decline of 19.81% from the end of 2008.
4th Quarter, 2009
Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q3 '09 Rental Rates1A 2,105,547 21.1% 21.1% 0.0% 459,287 459,287 0 (366,901) 3,409 $29.27B 2,759,197 25.0% 22.2% 2.8% 767,194 687,897 79,297 (220,034) (30,402) $25.00C 1,953,158 3.6% 3.6% 0.0% 66,043 60,043 6,000 30,620 (231) $23.00
6,817,902 17.69% 16.54% 1.15% 1,292,524 1,207,227 85,297 (556,315) (27,224)
Vacancy Rate Availability (SF) Net Absorption
CLASS “A” HISTORICAL VACANCY VS. LEASE RATES
1 Rates are Quoted as Full Service
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SAN FRANCISCO OFFICE • FOURTH QUARTER
UNION SQUARE MARKET SUMMARY
BY THE NUMBERS
$30.00 Per Square foot (Full Service) for Class “A” space. 11.71% Overall vacancy for the Union Square submarket, up from 11.45% in the third quarter of 2009.
(13,598) Square feet of negative absorption for all classes of space in the Union Square submarket.
4th Quarter, 2009
Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q3 '09 Rental Rates1A 181,715 3.4% 1.3% 2.1% 7,925 2,403 5,522 3,253 0 $30.00B 3,000,287 8.6% 8.3% 0.3% 391,404 368,391 23,013 (15,995) (2,761) $28.00C 2,643,155 15.8% 15.7% 0.0% 679,236 670,981 8,255 (856) (116,756) $24.00
5,825,157 11.71% 11.47% 0.24% 1,078,565 1,041,775 36,790 (13,598) (119,517)
Vacancy Rate Availability (SF) Net Absorption
CLASS “A” HISTORICAL VACANCY VS. LEASE RATES
1 Rates are Quoted as Full Service
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FOURTH QUARTER
Lic #00832933
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SAN FRANCISCO OFFICE • FOURTH QUARTER
SOMA MARKET SUMMARY
By: Riccardo Gale and Marc Trovato
The SOMA office leasing market reacted as expected to the macroeconomic woes of 2009, with vacancy increasing 38% and average asking rents falling 16% over the course of the year. However, the year finished on a positive note, with the 4th quarter showing absorption of 108,824 RSF (Rentable Square Feet) of positive net absorption, marking the first quarter of positive absorption since Q1 2008. Rents held firm in the fourth quarter and appear to have settled into the $27/RSF range. Fueling the positive absorption this quarter were Carat Interactive and Heald College, who combined for approximately 75,000 RSF at 875 Howard Street, and Twitter, who leased 60,000 RF at 795 Folsom. Additional positive absorption was the result of many smaller leased signed during the quarter. Larger tenants actively touring the market this quarter included Zynga for approximately 125,000 RSF (continuing to grow at 444 DeHaro), and Ubisoft for 50,000 RSF (in negotiations at 625 3rd Street). The EPA remains in search of approximately 350,000 RSF for its new headquarters office, which could land them at 370 3rd Street and bring that development to 100% occupancy. The availability of high-quality creative space has increased slightly, with new options
available for occupancy in 2010. Some of the more desirable available spaces in the market include:
625 Second Street – 32,000 RSF of creative brick & timber space divisible to 14,000 RSF
475 Brannan Street – Up to 80,000 RSF of creative, high end brick and timber space on two interconnected floors
139 Townsend – 33,000 RSF of creative brick & timber space over 3 contiguous floors
Investment sales activity remained sluggish. A speculative ballpark development at 72 Townsend Street was foreclosed upon, as the ownership failed to procure a tenant. Subsequent foreclosures will likely result in increased investments activity in 2010, driven by over leveraged landlords pressed by banks and lenders looking to revalue current assets. In conclusion, asking rates again fell slightly, but absorption was positive. Leasing volume was on par with the previous quarter, and tenant touring activity remains fairly positive. Landlords of good quality brick and timber space continue to demand a premium over commodity space, and remain focused on shorter lease terms. Landlords are increasingly open to “blend and extend” proposals from credit tenants hoping to reduce their current rent obligation in exchange for extended lease term. SOMA’s investment market continues to stall, as both buyers and sellers are
reluctant to make deals. The SOMA market remains attractive to tenants due to the location and high quality creative space options. Reduced demand continues to push rents down, presenting excellent opportunities for tenants in the market.
OVERALL RENTS VS. VACANCY 2Q ’07 TO 4Q ‘09
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SAN FRANCISCO OFFICE • FOURTH QUARTER
SOMA MARKET SUMMARY
4th Quarter, 2009 Submarket # of Buildings Total Sq. Ft. Available Sq. Ft. Vacancy Rate Average Asking Rent Absorption Sq. Ft.
South Beach 19 2,241,187 317,066 14.15% $24.52 50,945
Multimedia Gulch 39 3,999,008 1,122,984 28.08% $26.60 (91,038)
Yerba Buena / South of Market 19 2,561,807 1,138,702 44.45% $27.97 155,546
Potrero Hill / Inner Mission 14 1,258,838 395,801 31.44% $23.54 (8,629)
Mission Bay 4 588,405 273,272 46.44% $34.00 0
Totals: 95 10,649,245 3,247,825 30.50% $27.69 106,824 *Rates are based on a weighted average for available space only. SOMA Top Ten Buildings
Building Stories
BuildingSq. Ft. Total
1Rates Direct Avg.
Direct Sq. Ft.
Sublease Sq. Ft.
Total Avail. Sq. Ft.
Avail. TotalPercent
185 Berry Street 6 939,549 $32.00* 45,690 3,125 48,815 5.2%
475 Brannan Street 4 255,000 $34.00 80,000 0 80,000 31.4%
444 DeHaro Street 2 152,000 $28.00 16,000 0 16,000 10.5%
160 King Street 10 167,983 $31.00 10,696 66,086 76,782 45.7%
350 Rhode Island St. South 4 139,509 $29.00 34,841 0 34,841 25.0%
501 2nd Street 7 207,809 $30.00 10,003 32,040 42,043 20.2%
625 2nd Street 4 134,447 $27.00 31,909 12,410 44,319 33.0%
123 Townsend Street 6 138,735 $29.00 0 0 0 0.0%
139 Townsend Street 5 57,782 $30.00 32,242 0 32,242 55.8%
410 Townsend Street 4 80,000 $24.00 24,000 0 24,000 30.0% 1 Rates are Quoted as Full Service Largest Continuous Spaces Address Square Feet Available
370 3rd Street 365,584
155 5th Street 349,286
650 Townsend Street 313,376
500 Terry Francois Blvd. 268,245
185 Berry Street 175,000
875 Howard Street 100,000
160 King Street 56,963
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SAN FRANCISCO OFFICE • FOURTH QUARTER
SOMA MARKET SUMMARY
Top Leases
Tenant Lessor Square Feet Address
Twitter AOL/Bebo & Westcore 60,000 795 Folsom Street
Heald College TMG Partners 42,581 875 Howard Street
Carat Interactive TMG Partners 33,291 875 Howard Street
Zoom Systems ( S ) Macy's 20,000 22 4th Street
Parsons Brinckerhoff ( E ) Kennedy Associates 11,000 303 2nd Street Top Pending Leases
Tenant Lessor Square Feet Address
Undisclosed Engineering Firm 642 Harrison Street Ownership Group 12,000 642 Harrison Street
Top Building Sales
Building Square Feet Seller Buyer
640 Second Street 22,712 Paul J. Hockett 640 Second Street Ventures, LLC
( S ) = Sublease
( R ) = Renewal
( E ) = Expansion
( C ) = Cornish & Carey Involvement
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SAN FRANCISCO OFFICE • FOURTH QUARTER
AGENT ROSTER LEASING Jonathan Allen 415.445.5138 [email protected]
Karl Baldauf 415.445.5117 [email protected]
John Cashin 415.445.5112 [email protected]
Donnette Clarens 415.445.5120 [email protected]
Bart O’Connor 415.445.5102 [email protected]
Will Scovill* 415.445.5134 [email protected]
Nick Slonek 415.445.5100 [email protected]
Marc Trovato 415.445.5118 [email protected]
INVESTMENTS Erik Doyle 415.445.5111 [email protected] Russ Sherman 415.445.5104 [email protected]
Kyle Ladewig 415.445.5103 [email protected]
Rita Meehan 415.445.5135 [email protected]
MARKET RESEARCH
Ryan Carmichael 415.445.5133 [email protected]
Maddy Kieselhorst 415.445.5114
Kevin Delehanty 415.445.5132 [email protected]
Shannon Dolan 415.445.5105 [email protected]
Riccardo Gale 415.445.5119 [email protected]
Raquel Ledesma 415.445.5136 [email protected]
Jim Lucas 415.445.5106 [email protected]
Melinda Miyagishima 415.445.5108 [email protected]
John Norton 415.445.5137 [email protected]
INDUSTRIAL LEASING Bruce Carter 415.445.5142 [email protected]
RETAIL LEASING Tracy Chiao 415.445.5140 [email protected]
Erika Elliott 415.445.5124 [email protected]
Marissa Miller 415.445.5139 [email protected]
Tom Neuburger 415.445.5129 [email protected]
Rachel Pagan 415.445.5121 [email protected]
Julie Taylor 415.445.5128 [email protected]
C&C CAPITAL
Brad Zampa 415.445.5115 [email protected]
OFFICE ADMIN. BK Masterson 415.445.5150 [email protected]
* Indicates Life Science Specialist
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SAN FRANCISCO OFFICE • FOURTH QUARTER