Having hit a record high in the first half of the year, driven in part by the delivery of a record amount of high-end Class A space, all of which was delivered pre-leased, the average asking rent for office space in San Francisco overall ticked up another 1.1 percent in the third quarter of 2019 to $79.95 per square foot per year, which is 7.0 percent above its mark at the same time last year, according to Cushman & Wakefield.
At the same time, leasing activity dropped from 2.0 million square feet in the second quarter of 2019 to 1.7 million square feet in the third, which was unchanged on a year-over-year basis. And net absorption for the quarter barely measured 100,000 square feet, which dropped the four-quarter trailing average to its lowest point since the fourth quarter of 2017.
As such, the overall vacancy rate in the city inched down to 5.3 percent, which is 150 basis points below it mark at the same time last year and 30 basis points below the previous 10-year low of 5.6 percent set in 2016, with 4.5 million square feet of currently unoccupied space in the city (including 770,000 square feet of space which is technically leased but currently available for sublet versus 870,000 square feet of sublettable space the quarter before).
And while the cumulative need of tenants looking for new office space in San Francisco dropped by 2.0 million square feet (20 percent) in the third quarter to 7.8 million square feet, that’s with around 2.4 million square feet of office space currently under construction, all of which should be delivered by the end of next year, and at least three years before the first wave of prioritized Central SoMa Plan developments are ready for occupancy, assuming they soon break ground.