As we noted last week, there is nearly 12 million square feet of vacant office space now spread across San Francisco, including 5.6 million square feet of un-leased space and 6.2 million square feet of space which has been leased but is now sitting vacant and actively seeking a subletter (which is up from 770,000 square feet of sublettable space at the same time last year).
For context, the 1,070-foot-tall Salesforce/Transbay tower at First and Mission, which is the tallest building in San Francisco, contains 1.35 million square feet of office space spread across 59 floors.
In other words, there’s roughly 8.7 Salesforce towers, or 516 Salesforce tower floors, worth of empty office space in San Francisco at the moment, which is roughly enough space to accommodate between 67,000 (based on an average, pre-Covid, density) and 91,000 (a la twitter) worker bees.
And for additional context, Google’s headline lease of 42,000 square feet of additional office space in the city, which was billed as “one of the biggest San Francisco deals in a year” and a bullish sign of a major player “bucking the trend,” represented a little less than two (2) of the aforementioned 516 floors worth of vacant space.
Cool graphic.
Who’s hurting? Boston properties?
Donald J. Trump and Related Companies, in part.
Trump organization only owns 30% of 555 California St here in SF. The rest is Vornado.
You sure about Related? Never see their name out here.
I’m more curious from public REITs point of view.
You’re right I summoned “ominpresent NY landlord” from my brain and got the wrong answer.
Related’s marquis San Francisco properties are The Paramount, The Avery and 1550 Mission. Your brain was correct!
There’s ‘Mason on Mariposa’ (1601 Mariposa), along with a handful of affordable housing developments, as well.
But those are all residential developments (and the office component associated with the 1550 Mission Street development was built for the City).
Because a lot of this vacant space is still actively leased but vacant, it would be interesting to know how much of this space is in arrears on rent. While a lot of the Class A space is corporate with corporate guarantees and probably still paying, curious whether vacant start up space or others are paying rent while marketing space for sublet. That’s the next shoe to drop, commercial evictions, lender workouts due to non-paying tenants. Eviction moratorium can only go on for so long and is limited to certain types of commercial tenants.
[Editor’s Note: Small Business Eviction Can Kicked Down the Road]
What’s the equivalent metric for other transit dependent US cities (e.g. Manhattan)? Just curious whether SF has been more impacted than NYC and if so, by how much?
Seems like SF residential rents have been relatively more elastic post-covid than NYC rents.
Manhattan has a ~13% [vacancy] rate and 54M sq ft available (That’s right, that’s not the total space it’s the available space). About 40 SFT’s or 24 Empire State Buildings (to use a more relevant metric)
You reminded me why I am mystified by people getting or being excited about Salesforce/Transbay tower. The Empire State Building is 102 stories and 1,250 ft tall and was completed in May of 1931.
The 1,070-foot-tall Salesforce/Transbay tower was completed in Jan 2018. I don’t know why people think that’s progress.
The amount of empty office space will likely settle out a a significantly higher number. PG&E will be putting up its Mission Street HQ and other office space for sublease as it moves to Oakland. DropBox is expected to sublet another chunk of its Exchange space. Uber is rumored to be relocating to Texas despite being in the process of completing an SF office building. Using the skyscraper metaphor – how high will the vacant office space reach? 600, 700, 800 floors? Can SF average 1 million feet of net absorption/year over the coming decade? Not likely and so it could take 15 plus years to fill the empty space. Developers are getting the message as FivePoint is expected to pivot away from office space at its Candlestick project. The Tennis Club development has pushed groundbreaking out almost two years and the Bluxome project could be in doubt after Pinterest bailed.
More troubling is the loss of jobs – space for 91K workers is now empty. Many of these jobs are high paid techies. Each techie contributes 650K to the local economy every year. With tens of thousands of workers gone and many not coming back the ripple effects will be felt throughout the City’s economy. The City is facing a potential financial crisis. San Francisco and NYC have been particularly hard hit for a lot of reasons. As a comparison, the Puget Sound office market remains one of the strongest in the nation with vacancy climbing to 7.6% at the end of the 3rd. quarter. A little more than half the rate of San Francisco.
I’m sorry but I laughed out loud when you compared Puget Sound to NYC.
We are in the fourth inning of a global pandemic the likes of which has not been seen in 100 years. Dave doesn’t know how’s going to turn out. I don’t know. No one knows. I may be optimistic in thinking we’re in the fourth inning. Maybe we’re in the second.
More likely we are still in the first wave, so maybe bottom of the first. This is going to have many lasting and permanent repercussions, not from covid, but from maniacs like Newsome and Cuomo who think they know what’s best and have some kind of hero fetish where they think they save lives. The economic data and destruction is multitudes worse than the great depression, debt levels are at unmanageable levels and growing, and the Fed has no ammo left for the continued recession (by definition that’s a depression).
The problem with covid is not really deaths, imo. While it is absolutely tragic, that’s not why Newsome and Cuomo are closing economies. The problem with covid is that it fills up hospitals.
Now imagine a society where everything is open but the hospitals. Will people calmly go to gyms, nail salons, work, schools, while knowing that there are no more space in hospitals. Of course not! Imagine no more dialysis, no more cancer treatments, no more ER. You break a leg, poke out an eye, tough shit. But hey, gyms are open.
Full hospitals = collapse of the economy. That’s why smart people are trying to somehow control covid. If you manage covid, you can keep hospitals functioning. And if hospitals are functioning, you can open the economy.
That is exactly right. Newsom and the local governments are doing what they think they need to do to control the virus. In the absence of that, a lot of people are going to be too afraid of getting sick to go out and engage in any economic activity at all. Knowing that restaurants are controlling capacity and taking measures to prevent spread of disease makes me more likely to go to a restaurant. If I know that stores are going to be jammed full of sick people not wearing masks and breathing on each other, I won’t want to go to a store.
In the absence of bringing the virus under control, there will not be a return to more normal levels of economic activity. The black plague wasn’t good for the economy, either.
So far, any way, California is doing pretty well. That is all subject to change. In 3 years we will have an accurate picture of who did well and who didn’t, if Covid is cured by then.
Indeed. And then there’s the growing number “Long Haulers” – folks who can’t seem to shake off the effects of Covid.
Good point. When you think of the long haulers, we probably are in the first inning. No one knows how many of them there will prove to be, or what the long effects of Covid will be even if people recover.
But it is not difficult to improve hospital capacity on short notice. China did it. We can move thousands of troops overseas and wage a war but we cannot create tent cities to deal with a pandemic?
It is really not that difficult to find 1000 acres of isolated land within any state in the union to build out pandemic treatment facilities. A 1000 acres can easily accommodate 100,000 people assuming 400 sqft of treatment space per. Patients can be triaged at local emergency centers and the ones at higher risk can be forwarded to the larger treatment facilities for isolation and focused medical care.
In a state like California smaller tent-hospitals every 100 miles up and down the state and across — these are all logistical problems that have well defined solutions.
Don’t tell me some bright-brain in national security hasn’t had a plan for biological warfare/natural pandemics.
What transpired was an abject failure of leadership at all levels. And we can’t blame only the President. State of California has its own Dept of Public Health and a massive economy enough to warrant a disaster (natural or otherwise) mitigation planning.
Sorry, but your arguments don’t seem convincing.
its difficult to produce hospital capacity when there is a shortage of doctors and nurses to work there
@jimbo – Reasonable first responder training takes about 5 days. So it is possible to increase capacity in some manner if needed. Then again, if we cannot improve treatment personnel then we have a disaster waiting to happen. Its COVID now, it could be some other outbreak/situation tomorrow.
The situation being what it is, could we have deployed students/nurses in training?
Could we have diverted medical personnel from other disciplines towards pandemic treatment? (For instance — dentists, optometrists etc?)
Its not a perfect solution, but it isn’t an ideal situation either. But at the least we should’ve done what we could to avoid the deleterious economic effects.
If it is true that we have shortage of medical personnel in general, then that is a national & state security issue.
Tokyo appears to be at the seventh inning stretch.
Seroprevalence increased from 5.8 % to 46.8 % over the course of the summer. The most dramatic increase in SPR occurred in late June and early July, paralleling the rise in daily confirmed cases within Tokyo, which peaked on August 4.
YMMV…
I work for PG&E. We are not putting any of our space at 245 and 235 Market for sublease. Once more, you keep talking out of some orifice about things for which you have no accurate data. Five Point is pivoting to biotech space, which is going like gangbusters, and Candlestick make sense as it is just up the road from the massive life sciences agglomeration down at Oyster Point in South City, SF will be more than happy to see the likes of Uber decamp to Texas. Finally comparing empty but leased office space as an actual vacancy rate is apples to kumquats.
This is (at least) the second time you have quoted that figure $650K economic contribution per tech worker. Where does it come from and what, exactly, does that mean? Why would a tech worker contribute substantially more than a finance worker, lawyer, or non-tech manager earning similar money?
Articles attribute it to the Chief Economist of SF – Ted Egan. I emailed him for clarification, it’s from a simulation done with the REMI model -> remi.com
@DK — It seems overstated. I would like to see the support.
I am not an economist but if you assume a tech worker earns $130K, $650K is 5x that. If there is 20% leakage every time the money changes hand (i.e. money being sent outside the local economy and not coming back), you don’t get to a 5x contribution to the local economy. Examples of leakage include taxes paid to Washington and Sacramento, things ordered online from outside the area, probably also interest paid on mortgages and car loans to large banks (some of their shareholders are local to the Bay Area but most probably are not). I expect that leakage is much more than 20%.
Their work would help generate corporate revenue, some of that would go to the local economy. A lot would go for office rent (most of those buildings are owned by out-of-state investors).
I really question that $650K number.
All of that is true; you left out the fact that many, many tech workers are here from foreign countries on one of the various types of work visas and send portions of their earnings out of the country via remittances.
It seems overstated to me too, even considering a spending multiplier / non-salary spending related to an employee (payroll tax, office space, etc), which is why I reached out for details.
That Google lease was so incidental, and in process for years.
Very naive to see that as a anything but an anomaly right now
Makes you wish even more that they hadn’t defiled the skyline with that Salesforce monstrosity in the first place. But I guess it’s too late now to tear it down.
So you would prefer more banal squat boxes, I suppose? Like much of SF’s skyline. Newsflash: Nobody is building art deco anymore.
Salesforce looks pretty cool to me.
I wish those weren’t the architectural frame of reference these days: squat boxes, “art deco” (whatever the hell that’s supposed to mean), or megamaniacal eyesores. Just look around and you can see the architect’s profession is drowning in greed and expediency.
If you don’t even know what the term art deco means, then why are you qualified to be an architectureal critic? Your disdain for ST is “your opinion, man.” Some of us don’t mind it at all.
I disagree. Wasn’t my preferred design but my only real complaint is that the City allowed Hines and Boston to reduce the height of the tower.
Joe, get over it. No, it is not getting “torn down.” SalesForce is quite a robust and healthy company. If you don’t like the building, don’t look at the skyline. Back in 1971, many people hated the the new TransAmerica Pyramid. For years before it was built, there were vociferous protests over the building plans. People swore it would destroy the character of the city. San Francisco survived. Now, it is a city landmark, if somewhat crowded out by the many buildings that followed it. We are in the middle of a pandemic and you are concerned about an already constructed building? Get some perspective on life.
Not to propose a solution but are there stats on square footage of occupied tent space in SF?
Here are the stats:
10% nighttime only hookers with daytime placeholder who basically clocks in and out
20% Fentanyl sales and consumption operations with rotating staff
20% stolen merchandise sales and storage
20% Bike chop shop
20% basically abandoned but good luck getting them cleared
8% Party tents that are empty by day but wild overnight and lots of fires that spread to neighboring structures – fun times!
2 % actual homeless
0% kids
0% pregnant women
0% unemployed former neighbors displaced by your privilege
-source 911 and 311 complaints
100% native San Franciscans who are innocent victims fallen upon hard times! Get the statistics right! 🙁
Factually speaking, versus sarcastically, the vast majority (70 percent per the City’s survey last year) of the 8,000 homeless in San Francisco once had a permanent residence in the city; 43 percent have been in the city for over 10 years; and roughly 40 percent became homeless due to an eviction (13 percent) or having lost a job (26 percent). Statistics we first noted back in 2016 and have held true.
And now back to the actual topic at hand…
It’s over, thanks to a feckless City government, high rents, and hubris. Ask your self who the hell wants to live in a city, or visit a place with bordered up shops, closed restaurants, no entertainment, dirty streets and endless homeless crazies. SF is going to go through a deep depression, all of its own making.
I can’t stand the hippie delusional government we have either, but nothing lasts forever. We’re going back to work right smack in financial district once a vaccine is back. Offices may be empty, but rent is still being paid to hold them.
You can thank the lack of federal response and a complete incompetent in the Oval office. What a joke. Developers and landlords deserve what is coming
Not true. Gavin got what he wanted. It’s called a virus and the entire world is dealing and suffering with it. The only question is some people can’t tolerate the idea that suffering at some level is inevitable. In this case the suffering will fall on this city for not seeing the forest for the trees.
fun fact: 555 California is still the bigger building in terms of square footage. ~2M ft^2
Good luck with that office space recovery
Reading back through some of the items on Socketsite during the 2008-2010 period suggests that we could be in for some upheaval over the next couple of years. Many of the commenters of the time were writing-off San Francisco. Likewise, I think it is a bit premature to be doing that again now.
Agreed. The recency bias here is strong. San Francisco was doom and gloom in 2001, 2002 was the “bottom” and by 2003 things were on the upswing. I see this situation potentially as being an even quicker turnaround as a vaccine could provide a near instant reversion back to normalcy.
From 2000-2008 was an 8 year cycle, then from 2008 to 2018 a 10 year cycle. Doesn’t seem like much of a stretch to think this one will be 12-15 years. It seems like we’ve already surpassed those two cycles with rents dropping, people leaving, inventory piling up and restaurants closing. And we’re not even done. It looks like we’re heading into a winter wave of more cases.
And the eventual next peak might very well not be as high as the last. Obviously COVID catalyzed the exodus, but COVID is everywhere now and the exodus from SF seems far out of proportion to how hard we’ve been hit. As “Brahma” said this has revealed that many people (and jobs) were far more marginally attached to SF then we thought.
COVID will eventually be brought under control, but the pandemic also essentially forced some experiments and the results of those experiments are out there forever. When given the free hand to move anywhere they chose, many chose to leave here. Some of the cellphone tracking data showed that people left SF & NYC far more than other places. For NYC you could correlate this with how hard COVID hit the city, but we fared far better with COVID than many places. Someone showed me some info of the demographics here that got hit the hardest by COVID and how disjoint those demographics are from the demographics of the tech/professional workers here. That makes the size of the exodus even less correlated with the intensity of the pandemic’s effect.
Earlier on someone, I seem to recall it was you Panhandle Pro, said that they thought that while renters might leave homeowners wouldn’t because of ties to the community. But the results of this experiment are in and that turned out not to be true. Inventory hit a 20 year high, surpassing that of the great recession.
Someone also said that while sellers might sell, they wouldn’t compromise on price. But looking through the apple list there seems to be plenty of sales at 2015 prices. So that too turned out not to be true.
Very early on I talked to some people who were genuinely concerned that remote work was going to be a disaster and that we were in for widespread digital infrastructure breakdowns that would be incredibly destabilizing. But that, fortunately for all of us, turned out to be untrue. Companies are running 80-90% remote and nothing has really gone wrong. With Apple & Amazon even being able to go through with multiple product launches. (And of hardware devices even. Which my friend thought would be extremely difficult to pull off remotely).
We did an involuntary experiment and found that there isn’t a SF ‘Put’ that creates a floor for rents and prices. Even post COVID this changes the risk calculus for investors and homebuyers. We did an involuntary experiment and found that tech work does not have to be 100% in the bay area. Even post COVID this is going to change the thinking of VC’s tech management and tech workers.
I agree with most of this. This is a forced experiment that will lead to some permanent changes. I do think remote work and Tier 2 cities “catching up” means that SF will not be so dominant in tech and the next boom won’t be as big.
I also think SF will rebound and be just fine. It will continue to be the tech capital, office space and rental space will be filled again. The “SF is cratering into a permanent death spiral” talk is overstated.
I disagree with Paragraph Four, where you cite me. I don’t think the experiment is in. When sales reach all time highs (people actually sell and leave) I’ll admit defeat. Listings reaching all-time highs (testing the waters) isn’t enough. Actual sale prices, across the city, have not meaningfully (-10%) moved down from the 2018-2019 plateau I don’t believe. Yet!
It’s like this EVERYWHERE on West & East Coasts. NYC office towers are empty, perhaps still leased but almost no one is there day after day. Wait for the commercial real estate crash, it’s already begun with retail spaces at street level in NYC falling like a rock on the square foot costs. Prime location doesn’t mean a heck of a lot anymore.
House the homeless
meanwhile in south san francisco:
“The South San Francisco City Council on Monday granted developer Kilroy Realty Corp. rights to build an additional 150,000 square feet to meet tenant demand at its 2.2 million-square-foot Oyster Point project.”
“Kilroy has completed most of the infrastructure work in first phase of construction, which will feature more than 500,000 square feet of office and research and development space. The developer has signed major leases with Cytokinetics and Stripe, which plans to relocate from its San Francisco headquarters at 510 Townsend St. to Oyster Point next year. The first phase is expected to be completed next fall.”
“Vice Mayor Mark Addiego opposed the deal, citing concerns about the fluctating demand for lab and tech space and granting exceptions to developers to bypass the normal process.
“I know for a lot of city staff securing Stripe was a big win. And that’s OK. But we don’t know if the fintech business will be the same type of business it was envisioned as before Covid,” said Addiego. “I’m not afraid of biotech, I’m not afraid of this one tenant, but it’s not something I want to carry further.”
UPDATE: Visualizing the Vacant Office Space in San Francisco, Take Two