San Francisco’s Largest Office Space Pipeline In Over 30 YearsDecember 23, 2014
Over the past year, roughly 280,000 square feet of net new commercial space hit the market in San Francisco, a drop in the bucket relative to the current demand for space which has led to a spike in rents.
And while nearly 3 million square feet of new office space is currently under construction in the city, space which should be ready for occupancy within the next couple of years, over half that being built has been speculatively pre-leased by tech companies such as Salesforce, DropBox and LinkedIn.
That being said, there’s another 1.3 million square feet of space for which the building permits have either been secured or requested and the plans for another 3.8 million square feet of office space have already been approved.
And with proposals for another 4 million square feet of office space having been filed with the city and under review, the overall pipeline of commercial development in San Francisco is at its highest point in over thirty years, a pipeline which also includes nearly 3 million square feet of new retail space in addition to the 12 million square feet of office space outlined above.
Comments from Plugged-In Readers
So in summary:
3 million under construction (50% pre-leased)
1.3 million with permits secured or requested
3.8 million approved
4 million proposed and filed and under city review
+ 3 million in [retail] space.
And the transbay center, warriors
+6,700 units of housing under construcion
+12,000 under review.
I think its fair to say we’re in a massive shift in the bay area.
Happy new year!
time to build some transportation!!!
FOR. REAL. Muni needs to growup. Those little lightrail cars are not going to fit the bill in the long run. We needs massive investment in underground and perhaps above ground rail in the City.
Those city workers and construction workers will be busy. Best to plan early and get work done asap. Good work Mayor Lee — want to see more positives.
Happy New Year indeed!
Or, in the words of the progressives, the worst thing to happen to SF ever!
This is great news. A strong economy makes a great city with high quality of life.
But is an economy based on “aps” that make life easier for rich young 10% sustainable? Is this another Bubble?
why do you limit it to “aps” ?
I have the same doubts sometimes, but as a former tech person and someone that now works in CRE, it’s reassuring to know that lots of companies are generating big revenues. A lot of these companies are not sexy enough to make the news so it seems like Twitter and SnapChat are the average company which is in no way accurate. Also consider that a lot of companies positively affected by “tech” are contributing to the boom. For example, you wouldn’t consider a company like AETNA a tech firm, but they have prime office space in a tower for their tech incubator.
I believe it was the late Herb Caen who said that “everyone wants SF to forever be like it was the first day they arrived here.” Change and progress is inevitable.
There are parts of SF that I miss and are gone forever but I wouldn’t trade my “first day SF” for today, high prices and all.
Hey, can we bring back the Sutro Baths and the original Cliff House? The current CH is just ugly.
DM – I have met Herb Caen and he has written a blurb on my building in the 1980’s. Because his paramour was a tenant of the building. I don’t want to see SF back in the late 70’s. It was too quiet with too little economically going on. Even as a child, I thought, “this is it? this is my future? how bleak!” Sure it meant the competition was so much easier, but it also meant I was, also, growing at a reduced speed. For high achievers, it mean a regression. The natural progression is to improve and make better otherwise we would all be living in the Stone Ages.
MoD is correct though. I like the original CH better, much better breakfast. Sutro Baths would have been great if it was functional like it was back in the day.
Not that I have a problem wih software, but it’s only about 6% of our workforce. I’m doing biomed. The new hospitals are great for nurses and administrators, all the construction is good for construction people, architects and engineers. All of this means not only more service jobs, but also many fresh faces at organizations like Engineers Without Borders and Architects for Humanity.
If we would get rid of rent control and build more houses quickly, this would be an amazing time for the city. We could even expand social services and see if that works to clean up the city.
The progressives here seem to like shooting themselves in both feet.
Getting rid of rent control has to be done as state level proposition. SF’s liberals will never allow any words to go out about getting rid of rent control. Without rent control, all the liberals will lose their elections.
Not a bubble. It’s a mega-bubble.
The economic downfall following bubble collapse is proportional to the size of the bubble.
When this craters and there are millions of empty sq ft of space and another U-haul exodus back to Des Moines and Omaha, the buildbuildbuild savants here will either vanish or claim that they always knew it was a bubble and was unsustainable. Win-win.
and cheap rent will be had by all.
Unfortunately, no. Many LLs will simply sit on empty units. Instead of letting rents fall to “market rate,” they will wait for the return of the higher rents they feel they are entitled to. Rents rise quickly on the way up, but are very sticky on the way down. And down invoke rent control, because most of the vacant units in the next bust will be RC exempt.
That’s an absurd statement. So landlords are going to take their units off the market rather than rent them in a downturn? That makes no sense. Rents are high enough that you could rent both apartments and office space at 10% the current going rates and still easily cover your building management expenses. The only possible reason would be to not get locked into a low rate on rent controlled buildings, which as I’m sure you know doesn’t apply to commercial buildings at all and only to residential buildings before 1980.
Really… I know there are cranks and crackpots in the comment section, but could you try a bit harder?
Are you really so naive that you think everyone in SF just moved from Des Moines or Omaha (or some other “flyover country”). First, you are wrong. Second, Des Moines and Ohama are doing very well, have low-unemployment and strong growth, and most of their residents have no desire to move, let alone to California.
Perhaps, when it is time for a U-haul, you can rent one for yoursrlf and find a nice little desert island suited for a curmudgeon like you.
Des Moines, Omaha, Boise, Saginaw, Tallahassee, Chicago, San Diego, wherever, It doesn’t matter how good their economy is, the koder kidz come here. Most of the kidz at twitbookgoogpalbay are from outside the BA. QED.
When the bust comes and they can’t afford to stay after being laid off, they will high-tail it, just like they did after Bust#1.
The dot.com crash started in 2000 and then in 2008, we had the Great Recession. The economy just started recovering in about 2010, and it was a slow recovery. So, if all the newcomers moved away, one would expect that SF’s population would have shrank like it did during the period of 1970-1980. Instead, the population grew from 2000 to 2010. So, much for your theory that everyone moved back to Des Moines.
Tens of thousands did move out after the dotcom crash. The US Census determined that by changes in IRS tax filing place of residence. Their estimate was more than 70k by 2004. During the same time average asking rent in SF dropped more than 20%, which helped to replace those people.
…and the cheap rent will allow all of those job types that you love to come pouring in. What are you proposing is the downside here? The finance types that you hate will take a bath and the city will be cheap again for everyone – why not encourage even more if you’re so convinced that it’s a bubble?
Great to have more office space.
Many San Franciscans need to leave SF to work, that’s not a acceptable. SF needs to have many more jobs. As the urban center of the bay area, SF should increase the office space a lot more to become a job center. The commute pattern should change and there should be many more people commuting in rather than out. More office space means more tax revenue to the city.
SF does have more people that commute in from other counties than SF residents that commute out to workplaces in other counties. The inbound commute is at least three times as many as the outbound. It has been this way since at least 1990. Probably for much longer, but I haven’t looked up the data.
FWIW, SF has a net positive inbound commute flow from every county in the bay area, including Santa Clara.
I work at 140 New Montgomery and we’re moving to cheaper space. I hear that Yelp! is also moving out. Is this the beginning of the end?
Considering Yelp just signed a multi-year lease, they aren’t moving anywhere unless they can find a sublet tenant to cover their rent.
I believe Yelp is expanding.
Ah, bogus rumor then.
3 million sounds huge, but we’re talking about 10k-15k jobs at a density you’d typically find in a corporate office park.
A bubble is caused when huge amounts of investment money is poured into new companies that will hopefully someday make a profit. This is what happened in the late nineties when no one had yet figured out how to make the internet profitable and most start ups failed.
The difference now is profitability. These growing tech companies are consuming office space because of growing profits. Why would companies making tons of money suddenly abandon all of this new office space?
Google, Salesforce, Twitter, Facebook, Apple™ and many more, making huge incomes that are all spawning more and more profitable companies in the Bay Area. If you’re waiting for a Bubble, you’re probably going to be disappointed.
Google, Facebook and Apple are all building/expanding their headquarters oustide of San Francisco.
Twitter and Salesforce are HQ’d in the city and have revenue but neither company is profitable.
Majority of the new tech companies consuming space in SF right now are NOT profitable and most will fail. Companies are burning through huge amounts of funding and growing as fast as they can in a race to be the ones that win/survive.
Um, what? Twitter and Salesforce are not profitable? They had net losses in the most recent quarter, but that is not the same as “not profitable”. Hell, Microsoft had a net loss in a quarter last year in spite of being the one of the most profitable companies in history.
No, they are not.
“Amusingly, Twitter CEO Dick Costolo last week lauded the company’s “strong financial and operating results” despite its $144 million of red ink. Twitter is expected to lose about $1 a share this year, based on GAAP. It isn’t expected to turn a GAAP profit until 2017, according to JPMorgan analyst Doug Anmuth, who sees non-GAAP net of 40 cents next year.”
“Twitter trades at an enterprise value of 12 times projected 2015 revenue, in line with Facebook, which has GAAP earnings. Twitter bulls would argue that focusing on stock compensation is foolish because the story isn’t about near-term earnings but about growth—and the possibility of an acquisition by the likes of Google (GOOGL) or Facebook. But profits ultimately matter, and Twitter might not have any for several years.”
Same story at Salesforce, still losing money based on GAAP. Could cut their marketing expenses which are HALF their revenues and be profitable, but then they would then stop growing, would need to start firing people and wouldn’t need as much space…
It took Facebook years before it became profitable. And now it’s ridiculously profitable. Twitter will be next and Pinterest. The difference between companies like these as apposed to the late 90’s Bubble companies is they are sustaining themselves mostly by their own revenue allowing them to continue to grow and someday be profitable rather than existing mostly on investor income which eventually runs dry when the possibility of revenue is apparently impossible.
What happened to “the difference now is profitability” and companies are “consuming office space because of growing profits”?
Google, Facebook and Apple have an enormous affect on San Francisco’s economy. The majority of all new businesses will fail. Established, profitable companies are responsible for the expanding office space construction in San Francisco.
“Established, profitable companies are responsible for the expanding office space construction in San Francisco.”
No, they are not. The majority of leases for commercial space over the past two years have been signed by companies that are NOT profitable.
“Google, Facebook and Apple have an enormous affect on San Francisco’s economy.”
That’s true but they aren’t driving the market in SF right now. Companies hoping to someday make a profit/win the acquisition lottery are fueling the boom.
“A bubble is caused when huge amounts of investment money is poured into new companies that will hopefully someday make a profit.”
Your words, not mine.
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