The worldwide tech hub began the yr off slowly, persevering with on an already decelerating path. As final yr wound down, even with Google’s removing of the San Francisco Bay Venture, the tech and life sciences sector noticed vital workplace area being added, whereas San Francisco workplace properties modified fingers at a excessive common value per sq. foot.
As of January, the metro’s under-construction pipeline amounted to six.8 million sq. toes of workplace area unfold throughout 30 properties, accounting for 3.7 % of the present inventory, increased than the nationwide fee of 1.6 %. Throughout life sciences markets, Boston led with 5.2 % whereas different gateway metros recorded low figures, reminiscent of Los Angeles (0.8 %) and Chicago (0.5 %).
Workplace development exercise was restricted in 2023
A big venture at present underway is Kilroy Oyster Level’s Buildings D, E and F, that broke floor in late 2021 and are scheduled to come back on-line in June 2024. The three life sciences buildings will complete 865,000 sq. toes and are a part of the second part of Kilroy Realty’s 3 million-square-foot waterfront venture. Additionally dubbed as Gravitate, the $940 million addition on the 50-acre megaproject has JLL as leasing agent.
For the reason that begin of the yr, there was just one workplace property delivered within the metro. Brittan West, a three-story, 173,731-square-foot life sciences constructing got here on-line in January, in San Carlos, Calif. The location was offered to the Florida State Board of Administration in 2021, for $177 million, whereas builders Premia Capital and Prince Avenue Companions retained their possession curiosity within the asset.
Development begins in 2023 totaled 3 million sq. toes throughout 14 properties, whereas deliveries amounted to 1.9 million sq. toes of accomplished workplace area throughout 14 properties. In August and September 2023, Tishman Speyer accomplished two workplace tasks totaling 613,552 sq. toes of Class A workplace area. The eight-story Constructing B and the 13-story Constructing G are a part of the developer’s Mission Rock, a waterfront group that may embody 1.6 million sq. toes of workplace and retail area.
One other workplace property that got here on-line final yr is Alexandria Actual Property Equities’ 751 Gateway Blvd., a R&D workplace constructing totaling 230,592 sq. toes that was accomplished in October. The property is inside the submarket of South San Francisco and is a part of Gateway North Campus’ growth. The seven-story life sciences property is developed in partnership with Boston Properties.
San Francisco workplace offers lagged
CommercialEdge knowledge exhibits that as of January 2024, San Francisco had recorded very restricted gross sales exercise. That comes as no suprise, as final yr ended with 2.3 million sq. toes throughout 23 properties altering fingers, for a complete of $722 million. Amongst gateway metros, Manhattan led with $2.4 billion in workplace gross sales, adopted by Boston and Washington, D.C., each with $1.9 billion, Los Angeles ($1.7 billion) and Chicago ($1 billion).
Workplace properties in San Francisco traded at a median of $314 per sq. foot, because the market nonetheless carries a excessive value in comparison with different gateways like Los Angeles and Chicago, the place workplace property have been offered at a median of $266 and $109. By way of common value per sq. foot in 2023, Manhattan led with $833 per sq. foot, adopted by Boston at $346.
One of many priciest workplace offers within the metro consisted of Gaw Capital Companions’ $82 million acquisition of North Park, a 294,000-square-foot, Class A workplace constructing in San Francisco’s North Waterfront submarket. The property traded in December 2023 from vendor EQ Workplace, whereas ING Group Financial institution originated a $150 million acquisition mortgage.
One other vital sale was The Sobrato Group’s $80 million buy of One Harrison, a 1918-built low-rise workplace constructing within the metro’s South Monetary District. The 200,000-square-foot property was offered in February final yr by Hole Inc. Later in November, Rubicon Level Companions picked up a 137,031-square-foot workplace property for $72 million. In-built 2000, the asset at 123 Townsend St. was offered by CBRE Funding Managamenet. The property beforehand traded for $132.6 million.
Fluctuating workplace emptiness fee pointed upwards general
As of January, San Francisco’s workplace emptiness fee was 23.8 %, increased than the nationwide fee of 17.8 %. For the reason that begin of 2023 the speed has fluctuated considerably. Beginning at 18.8 % in January, the index continued to extend to 21.7 % in July. The very best emptiness fee was recorded in November 2023, when numbers reached 24.2 %.
The metro’s January emptiness fee was the very best throughout comparable markets, with the bottom registered in Washington, D.C. (17.2 %), whereas different metros had figures increased than the nationwide common, reminiscent of Chicago (18.1 %) and Seattle (22.9 %).
Vital lease agreements signed in 2023 in San Francisco embrace Alexandria Actual Property Equities Inc.’ long-term cope with CARGO Therapeutics, in December. The tenant signed a 99,557-square-foot deal at Constructing 2 of The Alexandria Middle for Life Science, a 276,945-square-foot Class A laboratory and workplace property in San Carlos, Calif.
Earlier in June, DivcoWest secured a 44,000-square-foot long-term deal at its 5000 Shoreline Court docket, a 140,000-square-foot workplace constructing in South San Francisco’s Sierra Level life science cluster. JLL negotiated on behalf of the tenant, clinical-stage precision drugs oncology firm IDEAYA Biosciences.
In April, tech firm Silergy Expertise signed a 27,715-square-foot relocation deal at Santa Clara Gateway workplace campus. The tenant expanded its Silicon Valley company footprint on the property whereas it additionally relocated its headquarters. The three-building workplace campus is owned by Irvine Co.
San Francisco’s coworking sector gradual however regular
As of January, San Francisco had 2.1 million sq. toes of shared workplace area, outpaced by Manhattan, that led with 9.2 million sq. toes, Los Angeles (4.3 million sq. toes), Chicago (3 million sq. toes), Boston (2.6 million sq. toes).
San Francisco’s share of coworking area as proportion of complete leasable workplace area reached 2 % in January, increased than Chicago (1.9 %), Washington, D.C. (1.6 %) and Boston, that was on par with the nationwide common of 1.7 %.
12 months-to-date by January, WeWork had the most important footprint of leasable workplace area within the metro, with places totaling 915,702 sq. toes. The flex workplace supplier was adopted by Regus, with 270,111 sq. toes, Areas 177,599 sq. toes, Studio by Tishman Speyer, with 158,000 sq. toes and Industrious , with 128,443 sq. toes.
