3 Reasons S.F. Isn't Slowing Down
1. Record Low Vacancy
Big deals from tech firms like Uber (like its 173k SF lease at 555 Market last month) have created an unprecedented level of net absorption, according to a fresh Colliers report out this morning. Absorption rates reached 900k SF last quarter, compared to 257k SF in Q4 2014. Vacancy rates fell to 6.7%, the lowest level seen in a decade for all classes of office space, despite 185k SF of newly constructed office space hitting the market—much of which was pre-leased.
2. No End In Sight
Colliers Regional exec managing director Alan Collenette calls this "San Francisco’s Glittering Age." He says it's the norm for the market to question sustainability well before this point in a real estate up-cycle (now six years old). "We have looked, diligently, but the evidence of a near-term peak is not just hard to find, it is completely absent.”
3. No Sign of Sublease Space
The first sign of a slowdown is often sublease space—from "starburst" companies—those that have expanded into office space without the business model to support the growth. But vacant sublease space is virtually non-existent (at 0.6%) and has stayed below 1% for over four years. And construction remains hot, as the report says over 5M SF of office space is under construction, with another nearly 11M SF either proposed or in various stages of planning.
