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Market Report

San Francisco Office Market Report

2019 Outlook

Suburban Campuses Lead Reduced Construction Slate; Investment Activity Remains Elevated

 

Development retreats from cycle highs, construction focuses on suburbs. Amid one of the strongest economic growth cycles in San Francisco’s history, unemployment has fallen below the lowest levels of the Dot Com era, ending last year below 1999’s mid-2 percent low. This has sponsored enormous improvement in the office sector, as traditional office-using positions frequently make up nearly two-thirds of all new jobs in the metro. As a result, vacancy has fallen sharply over the current business cycle, ending last year at nearly 9 percent. Meanwhile, development will retreat from the cycle high reached last year, when nearly 5 million square feet was completed. While most of this year’s projects are focused on San Mateo County, the largest completion will be the Park Tower at Transbay in the southern portion of the Financial District in San Francisco. Burlingame Point and Menlo Gateway highlight deliveries in San Mateo County, with the latter fully leased to Facebook. The vast majority of this year’s development is pre-leased, accelerating the pace of rent growth for the remaining available space.

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