Market Overview - Axiant Group

Market Overview - Axiant Group

Market Overview A quarterly publication of the San Francisco office market by The Axiant Group The 1st quarter continued the trend we saw throughout ...

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Market Overview A quarterly publication of the San Francisco office market by The Axiant Group

The 1st quarter continued the trend we saw throughout 2014. The 1st quarter’s absorption rate surpassed any quarter in 2014. Correspondingly vacancy rates dropped dramatically, moving downward over 1.5%. Demand Continues to Increase SAN FRANCISCO FINANCIAL CORE

First quarter leasing activity in San 60 14 Francisco’s financial 50 core was extremely 12 active compared 40 to the 4th 10 30 quarter. Vacancy 20 rates decreased 8 d r a m a t i c a l l y, 10 moving from an 6 0 adjusted 8.3% in Q115 Q214 Q314 Q414 the 4th quarter to 6.8% in the 1st quarter. Gross leasing activity increased over 550,000 square feet, moving from 1,221,360 square feet in the 4th quarter to 1,791,251 square feet in the 1st quarter. Net absorption skyrocketed to 771,881 square feet in the 1st quarter compared to 5,661 square feet of positive absorption in the 4th quarter. Class B Rents

Vacancy

% Vacancy

$ Rental Rate

Class A Rents

Class A space average asking rental rates increased from $56.37 in the 4th quarter to $58.30 in the 1st quarter. Class B financial core average rental rates increased from $49.58 in the 4th quarter to $52.51 in the 1st quarter. Class B absorption was positive as well at 374,538 square feet. This was a substantial increase from 4th quarter which had positive absorption of 107,101square feet.

Mainland China Extremely Active Offshore buyers see commercial office buildings in San Francisco as a very attractive investment. Mainland China investors have been especially active in the market and have purchased several downtown office buildings. Recent examples are 123 Mission Street which was purchased by Great Eagle Holdings and 225 Bush Street which was purchased by the Genzon Group.

123 Mission

1st Quarter 2015

Mainland China investors also have an appetite for development projects. TMG Partners and Northwood Investors recently sold their interest in 1st and Mission, a 2,000,000 square foot mixed use development site to Oceanwide Holdings. The price for the development rights was $296 million; this will be one of the largest developments in San Francisco’s recent history. In addition, Gemdale Corp. purchased a commercial office development site at 350 Bush from Lincoln Properties and ABS Capital Management for $76 million.

Uber’s Need for Space Insatiable Uber finalized another deal in late March for an additional 173,000 square feet at 555 Market Street. Uber now leases space in three different buildings on Market Street, which totals over 500,000 square feet of office space. Uber additionally has over 400,000 square feet being built out in Mission Bay. The opportunity became available when the existing tenant Omnicom, an advertising conglomerate, downsized dramatically and moved to 40,000 square feet of space at 600 California. Uber is now the second largest tech user in the San Francisco Market place. Number one is Salesforce, who occupies over 555 Market Street 2.5 million square feet of space.

Two Embarcadero Center, Suite 430 | San Francisco, CA 94111 www.axiantgroup.com

SA N F RA NCI SCO MARK ET OVERVIEW SAN Space? FRANCISCO FINANCIAL CORE Where’s the

SAN FRANCISCO SOMA Class B Rents

Vacancy

Class A Rents

11

70 9

50

30 5

20

10

10 Q214

Q314

Q414

Q115

MARIN South Marin Rents A&B

Central Rents A&B

50

Q214

Vacancy Central Vacancy South 17

40

15

30 13 20

% Vacancy

$ Rental Rate

Large Tenants in the Market 0

3

0

Q214

Q314

Q414

Q115

9

OAKLAND CBD Class A Rents

Class B Rents

Vacancy 18

50

16

30 14 20 12

10 0

% Vacancy

$ Rental Rate

40

Q214

Q314

Q414

Q115

10

Tenant Uber Docusign** First Republic Bank* ** Crunchyroll Mixpanel AON Omnicom

Class B Rents

12 20

% Vacancy

$ Rental Rate

14

30

10

10

John Abel – Principal 0

8 Q214

Q314

Q414

Q115

Sq. Ft. 172,838 119,000 103,000 71,614 60,593 53,180 1,648

Address 555 Market Street 221 Main Street 388 Market Street 835 Market Street 405 Howard Street 425 Market Street 600 California Street

Do you want information about rents and space available in your building? Are you interested in subleasing or terminating your lease? Is your lease expiring in the next three years?

16

40

Sq. Ft. 250,000 200,000 200,000 200,000 150,000 120,000

The Axiant Group Can Help You

Vacancy

50

6 Q115

Q414

* Lease renewal ** Lease expansion *** Land Purchase

PENINSULA Class A Rents

Q314

Tenant Stripe Twitter Pintrest JP Morgan Chinese Technology Trade Assoc. Lending Tree

Significant Leases Completed in the First Quarter

11

10 0

Vacancy

% Vacancy

7

40

% Vacancy

$ Rental Rate

60

Class B Rents

Submarket Total SF Vacancy 60 Direct SF Vacancy Sublet SF Vacancy 14 (direct) (sublet) (Total) 50 Top 10 Build. 509,102 5.50% 129,221 121.40% 638.323 6.90% 40 2,880,445 Fin. Dist A 6.90% 233,587 .60% 3,114,032 7.50% Fin Dist. B 584,369 4.60% 32,805 10 .30% 617,174 4.80% 30 SOMA A 220,467 7.40% 39,123 1.3 0% 259,590 8.70% 20 SOMA B 346,731 3.90% 99,214 81.10% 445,945 5.00% $ Rental Rate

80

Class A Rents

1st Quarter 2015

Contact The Axiant Group. We have handled transactions from 1,000 to 1,000,000 sq.ft. in the Bay Area and throughout the U.S. The average tenure of our brokers is over 20 years. We have handled assignments for clients including Chevron U.S.A., Coblentz, Patch, Duffy & Bass, Oracle Corporation, PG&E, Sutro & Company, Zurich Scudder Investments, Charles Schwab, Texas Pacific Group, Club One, Moss Adams, and many others.

T 415.374.2103 [email protected] License #00884176

Two Embarcadero Center, Suite 430 | San Francisco, CA 94111 www.axiantgroup.com