Having slipped a nominal $0.11 per square foot (0.1 percent) in the first quarter of 2017, the average asking rent for office space in San Francisco inched up $0.50 per square foot (0.6 percent) in the second quarter of the year to an all-time high of $70.16 per square foot per year.
That being said, the year-over-year gain in asking rents has dropped to 1.2 percent, down from a 2.4 percent gain in 2016, a 15 percent gain in 2015 and an average annual increase of nearly 20 percent over the previous six years.
And while the overall office vacancy rate in San Francisco decreased by 30 basis points in the second quarter of the year to 8.4 percent, and remains 0.7 percentage points below the historical average of 9.1 percent, it’s the second highest vacancy rate in San Francisco since the third quarter of 2014 and 1.1 percentage points higher than at the same time last year, according to data from Cushman & Wakefield.
In addition to 5.2 million square feet of truly vacant office space in the city, the amount of rented space available for sublease remains at 1.4 million square feet.
And while leasing activity has totaled 3.3 million square feet in the first half of the year, versus 6.2 million square feet in all of 2016, net absorption was a negative 115,000 square feet in the second quarter of 2017 versus a positive 271,000 square feet in the second quarter of 2016.
And in addition to 2.3 million square feet of new office space slated to be ready for occupancy in San Francisco by the end of the year, 55 percent of which is currently pre-leased, another 2.9 million square feet of space is also under construction.