San Francisco is a tale of two office markets. Demand for large space exceeds supply with over 80% of the nearly 5 million square feet planned for delivery in 2018 being pre-leased as high as $100+/rsf. On the other hand, adoption of co-working space by small, emerging and fast-growing tenants is placing pressure on traditional Class B and Class C building landlords to attract tenants with softer asking rents and higher tenant improvement allowances.

  • The San Francisco Office market ended Q4 2017 with a total vacancy rate of 8.19% which was down slightly from Q3 (8.26%) and up from Q4 2016 (7.85%). Mission Bay/China Basin (2.69%), Mid-Market (3.33%) and Jackson Square/No. Waterfront (5.37%) were the tightest submarkets. Financial District (11.44%) remained the only submarket with double digit vacancy.
  • Total market direct asking rental rates for Class A continued to remain steady at $70.25/rsf, down slightly from Q3 2017 ($71.84) and up slightly from previous year Q4 2016 ($70.06). Class B direct asking rental rates were down to $61.23/rsf from Q3 2017 ($64.32) but remained flat from Q4 2016 ($61.59).
  • Union Square ($74.80), South Financial District ($73.32), and Financial District ($71.01), command the highest Class A asking rents. Tenants seeking value are finding Class B asking rents below $60/rsf in Mission Bay/China Basin ($42.08), Mid-Market ($52.16), SOMA ($54.83), and Van Ness Corridor ($58.48).