“Cost-cutting tenants have dumped 1.2 million square feet of unwanted office space on the sublease market since July 1, the latest sign that San Francisco’s economy is slowing amid a national recession and credit crisis.
The trend has accelerated over the last 60 days as some 170 companies sought to unload 685,000 square feet of space, according to a report from Colliers International. A total of 2 million square feet of sublease space is available in the greater downtown — enough to accommodate about 8,000 workers. About 35 percent of the available sublease space is already vacant.”
“With new top-notch sublease options coming on the market weekly, the spread between the price of view space and non-view space has narrowed. At the height of the rent bubble, view space was attracting $25 a square foot more than non-view space; now that has dropped to about $8 a square foot, with water view blocks going for $55 a square foot and city view suites leasing at closer to $35.”
∙ Space glut drives down San Francisco office rates [San Francisco Business Times]
Will Transbay Tower boosters please remind me again why it will be built? Who would they want to go forward with such a huge project in this economy? The Chicago Spire, a similar super-tower project, has completely shut down, after months of initial work on huge underground footings.
Chicago Spire is residential in a city that has generally allowed lots of high rise residential where profit comes from selling the units – other times to build will come.
Transbay Tower is a supertall commercial tower that will be built in a city that makes it very hard if not impossible to build tall towers. They would likely be the tallest tower here for decades, if not centuries. Profits come from leasing space in what would be one of the most desirable buildings in the city – for decades and decades.
Timing the market matters for Chicago Spire, not as much for Transbay – in fact, now may be a better time to build Transbay if financing isn’t an issue, since commodity and labor prices will be lower.
Did you read the ariticle? There is no great demand for premium expensive commercial space in San Francisco presently, or in the near future. The WSJ had an excellent serious of articles recently on the commericial real estate bubble which is now bursting as well, and San Francisco was a major focus of the trouble that is coming. What financial institution is betting on Transbay? I would stay away from whomever is involved with such a project. Transbay is too late to the party to be anything other than another unbuilt dream.
Commercial buildings make money for decades – the short or even medium term shouldn’t matter that much to a company that is well diversified and capitalized. Residential buildings have to time the market very closely to make money.
Perhaps we have a developer that is looking at returns for the next 30-40-50 years, rather than the 1-2 year outlook that has become common over the last decade?
I hope the long term view towards Transbay Tower you have noted is correct. If only such a long term view was used for planning for transit, traffic and housing in this city. Do you know who is funding Transbay Tower? They show a lot of courage in the face of what could be a world wide depression.
in fact, now may be a better time to build Transbay if financing isn’t an issue
a big if.
Construction of the proposed Transbay Tower will take upwards of 5 years to complete. Office market dynamics change dramatically in that legth of time.
Although the market clearly turned south in 2008, keep in mind a historical perspective. 5 years ago, we were coming out of the dot-com bust. Vacancy was 25% (twice its current rate), and sublease space was more abundant then it is now.
I have enough faith in our country and even more in our dynamic city to believe that markets will recover within the next 2 years.
Perhaps we have a developer that is looking at returns for the next 30-40-50 years, rather than the 1-2 year outlook that has become common over the last decade?
I hope he lives long enough to enjoy it..because in between here and forward 30 years he is going to be losing a lot or money…
Commerical is dead…consumer is dead…business is dead…
no way out of this outside of devauling dollar x9…
many commercial props… were spectulators too…
your 4-5% cap rates will lead cre to hell…
SF is cheap there…
The comments above regarding the death of the Chicago Spire were perhaps premature. Labor Unions could save the Spire project instead of killing it. It sounds crazy, but costs to union pensions could be possibly better spent by providing jobs to members and taking partial ownership of a project instead of paying out monthly unemployment benefits. Bizarre but interesting at the same, could this same type of investment structure be used by Bay Area unions for the Transbay Tower?
http://online.wsj.com/article/SB126023594022181191.html