Surprise: San Francisco Office Rents Are Falling

Bloomberg has a hit piece out on San Francisco office landlords, in which it cites Colliers International’s numbers:

• Q1 2009 office rents in the “city” dropped 24%, year-over-year
• Class A rents fell from $50.92 to $38.80 psf/year
• Office vacancy rose to 13.2 percent from 12.6 percent in the previous quarter, and up from 10.2% in the 1st quarter of 2008.

This isn’t surprising after rents artifically took off in 2006-2008 driven not necessarily by demand, but instead landlords trying to meet the rent numbers they plugged into their proformas. As unemployment soars, rent and occupancy rates will continue to decline for months afterwards, and we are still in an environment where unemployment is increasing. In fact, it has been increasing for over a year now. San Francisco’s unemployment rate rose to 8.3% in February, after bottoming around December of 2007 around 4.20% (see below chart for historical context).

What’s even more concernings is that according to the Bay Area Council’s spokesman, John Grubb:

Almost half of the largest companies in the San Francisco Bay Area plan to cut staff in the next six months

It’s a good time to be a tenant, just remember to get those non-disturbance agreements.

Similar Posts:

• US Office Vacancy At 5-Year High; Rents Plummet
• San Francisco Bay Area Consumer Price Index (CPI) Up 4.7% Year over Year
• Q3 2009 Update: Silicon Valley Rents, Vacancy Rate, and Unemployment Numbers
• Manhattan Rents Decline 6-9% Year-Over-Year
• 533K Layoffs Nationwide in November; California, Silicon Valley Unemployment Rate Update

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