Citing the emergence of “slow or no growth policies” amongst both start-ups and more established local firms, the office vacancy rate in San Francisco jumped 1.6 percent in the second quarter of 2016, the largest quarterly increase since the first quarter of 2009, according to data from Cushman & Wakefield.
And in addition to 4.1 million square feet of truly vacant space, the amount of rented office space available for sublease roughly doubled over the past quarter to 1.5 million square feet, with tech firms accounting for 48 percent of those offering their excess space for rent.
On the demand side, new leasing activity in the second quarter totaled 1.3 million square feet, down from 1.4 million square feet in the first quarter and the slowest second quarter on record since 2009, while the need for those actively looking for space dropped from 5.5 million square feet in the second quarter of 2015 to 3.6 million square feet today, with 3.8 million square feet of new office space under construction in the city, a quarter of which is currently pre-leased.
And of course, employment in San Francisco has slipped, an emerging trend we first identified last year.
All that being said, the current office vacancy rate of 7.3 percent remains two points below the long-term average for San Francisco and the average asking rent, which Cushman & Wakefield notes is “slow to adjust in a quickly changing market,” ticked up 1.3 percent (86 cents) over the past quarter to a record $69.30 per square foot per year.