Back in 1999, the year before the dot-com boom busted, 7.4 million square feet of office space was leased in San Francisco. Through the first three quarters of 2014, 7.6 million square feet of office space has been leased in the city, setting a new record with a quarter left to go.
That being said, while the average rent of $62.33 per square foot for Class A office space is 11 percent higher than at the same time last year, and 80 percent higher than at the end of 2010, it’s still 17 percent below the high-water mark of $74.24 per square foot set in 1999, as reported by the Business Times.
On the supply side, there is over 4 million square feet of new office space under development in San Francisco, the largest pipeline of commercial space in over thirty years, but the majority of said pipeline won’t be ready for occupancy until post-2015 and over half has already been speculatively pre-leased by companies such as Salesforceand LinkedIn. In other words, expect rents to continue to climb in the near-term.
And as we noted a few month ago, with “creative space” and access to transportation, such as Caltrain, continuing to command a premium, the most expensive area in San Francisco is currently around AT&T Park while the relative bargain is around Jackson Square if you happen to be in the market for some space.
There may be some wiggle room under the Prop M caps to permit more construction. Check out this article in SF Business times. Of course, that would require the blessing of the original Prop M proponents who are still alive and kicking:
The Prop M proponents might be too busy campaigning to have all SF streets converted to cobblestone, and organizing to legislate bouncers at all entry points into SF, so only the “right people” can get in.