Empty offices build up in city
By: John Upton
Examiner Staff Writer
December 18, 2008
 |
| Office vacancies are growing in San Francisco. |
SAN FRANCISCO — Companies in San Francisco are searching for subtenants to lease 800,000 square feet of office space that has been abandoned and left empty, a barren manifestation of job losses across The City.
According to city statistics, 8,200 workers have lost their jobs this year in San Francisco. About 10 percent of jobs in The City are in the financial sector, which is experiencing job losses in the wake of defaults and foreclosures caused by overlending.
The recent collapse of two big law firms has dumped a substantial amount of office space onto the market, according to tenant broker Frank Fudem.
“If you’re a landlord, it’s getting a lot worse,” Fudem said.
Gift retailer Red Envelope is searching for subtenants for its six-story SoMa headquarters, because it was acquired in June by Provide Commerce, which is shifting its newly owned company to San Diego, according to spokeswoman Karen Behrman.
However, in a speech about the economy posted on YouTube as part of his State of The City address, Mayor Gavin Newsom was upbeat about consistent growth in the amount of overall office space leased in San Francisco in recent months and years.
“This has been a remarkable run,” he said.
Vacancy rates affect city revenue, because they can impact property values for tax-assessment purposes and because full offices pay higher payroll and utility taxes, according to City Controller Ben Rosenfield.
Total office space available for lease in San Francisco recently surpassed 10 million square feet, as companies collapsed or laid off staff and as newly built office space came onto the market, according to Jesse Gundersheim, Grubb & Ellis Co. research analyst.
The glut of space drove down the average amount companies are paying per square foot from $46 in July to $38 in October, and further decreases are expected, according to Gundersheim.
The precise market value of office space is difficult to assess right now, because few deals are being signed, Gundersheim said.
There is currently 2 million square feet of office space available for sublease in San Francisco, including 810,000 square feet that is currently vacant, according to figures provided by Tove Nilsen, director of Market Research at Colliers International. More than 500,000 square feet has been left vacant since July, Nilsen said.
There’s about 80 million square feet of office space in The City.
The holiday season combined with the recession is making it difficult for brokers to find tenants, according to Colliers International broker Mike Monroe.
“The holidays is typically a slower period for us,” he said.
Floored
Office space recently added to the sublease market in The City:
- 275 Battery St.: Floors 11, 13, 15, 21 and 24 to 26 available from O’Melveny & Myers LLP
- 333 Bush St.: Floors 7 to 11 and 27 to 34 available from Heller Ehrman LLP
- 149 New Montgomery St.: Floors 2, 3 and 5 available from Red Envelope
- 625 Polk St.: Parts of floors 1 to 6 available from California Culinary Academy
- 101 Second St.: 23rd floor available now, entire property might eventually be available, from Thelen, Reid, Brown, Raysman & Steiner LLP
- 153 Townsend St.: Floors 5, 7 and 9 available from DLA Piper
Source: Colliers International
