Contiguous and Noncontiguous Office Space Availabilities in San Francisco

With a recent slowdown in VC investing in the Bay Area, coupled with a significant amount of new construction hitting the market within the next 6 – 24 months (think Salesforce Tower, 181 Fremont and the like), we put together an infographic showing the large blocks of office space available now (both direct and various sublease options) and included new construction that will come online in the near future in San Francisco, all over 100,000+ square feet. Think of all those cranes in San Francisco that are nearing completion!

Even with a large number of tech companies seeking expansion space in San Francisco currently (think NerdWallet, Slack and others), there are many more large blocks of office space available compared to the amount of tenants currently looking for new space.

Contiguous and Noncontiguous Office Space Availabilities in San Francisco
Larger than 100,000 Square Feet As of October 2016

100,000+ square Feet Office Space Availabilities in San Francisco

CONTIGUOUS BLOCKS OF 100,000+ SQ. FEET:

Address (Building Name)

Sq. Ft Available (+/-)

Contiguous (Y or N?)

Date Available

250 Howard Street (Park Tower)

1800 Owens Street (Exchange on 16^th)

680,000

July 2017

415 Mission Street (Salesforce Tower)

655 Montgomery Street

560 Mission Street (upper block)

650 California Street

112,142

Vacant

560 Mission Street (lower block)

101 California Street

104,483

1 – 30 Days

375 Beale Street (MTC Building)

103,892

Now

185 Berry Street (Berry Building)

One Embarcadero Center

100,215

Feb – Oct 2017

TOTAL

6,865,786

*Office Space Inventory as of October 2016

NONCONTIGUOUS BLOCKS OF 100,000+ SQ. FEET:

Address (Building Name)

Sq. Ft Available (+/-)

Contiguous (Y or N?)

Date Available

101 California Street

One Montgomery Street

160,543

Vacant

One Embarcadero Center

148,056

Now – Oct 2017

315 Montgomery Street

140,839

1 – 30 Days

Four Embarcadero Center

126,111

Now – Dec 2017

1301 – 1355 Market Street

100 California Street

TOTAL

2,043,092

*Office Space Inventory as of October 2016

Square feet available in 2016:

2,343,028

Square feet available in 2017:

2,823,511

Square feet available in 2018:

1,412,900

Square feet available in 2019+:

2,329,439

Contiguous and Noncontiguous Office Space Availabilities in San Francisco
Larger than 100,000 Square Feet As of October 2016

Large Block Availability

With a lot of industry chatter about growing companies needing large blocks of office space (think Lyft, Atlassian, Credit Karma, & more), here is a look at the availability of buildings that have at least 100,000 square feet of office space available in San Francisco:

CONTIGUOUS BLOCKS OF 100,000+ SQ. FEET:

Address (Building Name)

Sq. Ft Available (+/-)

Contiguous (Y or N?)

Date Available

250 Howard Street (Park Tower)

751,500

March 2018

1800 Owens Street (The Exchange on 16^th)

715,000

July 2017

415 Mission Street (Salesforce Tower)

700,000

April 2017

350 Bush Street

432,978

February 2017

181 Fremont Street

410,313

November 2016

100 Hooper Street

400,250

June 2017

215 Fremont Street

305,502

Now – March 2018

500 Howard Street (Foundry Sq. IV)

224,874

April 2018

Pier 70

184,000

TBD

999 Brannan Street

150,000

Now

560 Mission Street (upper fl. cont. block)

144,986

October 2017

50 Beale Street

114,804

October 2016

560 Mission Street (lower cont. block)

108,092

October 2017

375 Beale Street (MTC Building)

103,892

Now

185 Berry Street (Berry Building)

102,329

Now

*Office Space Inventory as of December 2015

NONCONTIGUOUS BLOCKS OF 100,000+ SQ. FEET:

Address (Building Name)

Sq. Ft Available (+/-)

Contiguous (Y or N?)

Date Available

525 Market Street

285,341

Now – August 2016

101 California Street

210,780

Now

2 Embarcadero Center

207,328

Now – August 2016

201 Mission Street

202,112

Now – August 2016

3 Embarcadero Center

179,569

Now – April 2016

650 California Street

172,296

April 2016

4 Embarcadero Center

159,249

Now – June 2016

315 Montgomery Street

140,930

Now – April 2016

185 Berry Street (Wharfside Building)

110,654

Now

1455 Market Street

104,521

Now

275 Battery Street

101,068

Now

*Office Space Inventory as of December 2015

With a significant amount of new supply coming available in 2016 and beyond, will vacancy rates switch direction and head up???

San Francisco’s Influx of Subleases

A significant indicator of the changing commercial real estate market in San Francisco is the influx of sublease space hitting the market. Over the last three years, the subleasing market has been virtually nonexistent for large blocks of space, but we are now starting to see these large subleases become a growing trend. Below is a partial list of larger subleases (over 40,000 square feet) currently available in San Francisco:

ADDRESS	SQUARE FOOTAGE	SUBLESSOR
3 Embarcadero Center	98,066	Morgan Lewis
1 California Street	95,730	Salesforce
235 Second Street	76,516	CBS Interactive
123 Mission Street	70,989	Salesforce
600 Montgomery Street	54,645	AE Com
1455 Market Street	48,876	RocketFuel
1455 Market Street	48,845	Square
600 Harrison Street	40,428	IZ-ON Media

What could this sublease trend mean for the future of the commercial real estate market in San Francisco?

Skyline of the Future

With many development projects underway and others still in the works, San Francisco’s skyline continues to rise to new heights and expand into new neighborhoods south of the original downtown core. Below is a comparison of SF’s current skyline with the potential skyline of the future.

CURRENT:

FUTURE:

Are you a fan of San Francisco’s changing skyline?

San Francisco Rising

Have you noticed the influx of traffic, scaffolding, and cranes? It’s hard to miss it these days in San Francisco. With all types of real estate booming in San Francisco, seeing cranes all around us has become a regular part of our skyline. Our city is experiencing its highest level of real estate development in more than a decade, and it shows little sign of slowing down.

Looking just at new office buildings, or mixed use properties that include office space, it is noteworthy that most new office developments are already full or partially leased by large tech companies. Those include the likes of Dropbox, LinkedIn, Salesforce and Trulia.

Some of the largest and most notable new development projects in San Francisco that are already under construction are presented in the following chart (as of November 2014):

PROPERTY	TENANT	SQUARE FEET +/-	% PRE-LEASED
85 Bluxome	N/A	55,000	0%
333 Brannan	Dropbox	185,000	100%
345 Brannan	Dropbox?	102,585	100%
350 Bush	N/A	372,000	0%
181 Fremont	N/A	404,000*	0%
350 Mission	Salesforce	420,000	100%
415 Mission	Salesforce	1,400,000	50%
535 Mission	Trulia	303,780	20-25%
222 Second	LinkedIn	450,209	100%

Chart above is in alphabetical order, by Street address.

* 181 Fremont is a mixed used property. 404,000 sq. ft. is the office portion (plus 74 +/- condos coming soon).

NOTE: The list above includes office buildings where construction has already begun (not including “planned” developments. There are many additional proposed developments in San Francisco, some of which will be built (only time will tell).

In summary, all of these buildings above are projected to be completed within the next 2-3 years. Within that time frame these new properties will bring an additional 3.7 million square feet of office space, of which 1.75 million square feet +/- is still available.

The question is, will this all hit the market and drive up vacancies, or will more tenants continue to prelease this new construction before it hits the market?

Why Efficiency Matters

Ever hear about a load factor? Or, know what it is? And, why should it matter to you? First, let’s define a load factor. A load (aka efficiency) factor is the percentage of an office building that is common area (think lobby, common corridors for a multi-tenanted floor or building, but excludes outside spaces and excludes staircases and elevators). A load factor is also the difference between the rentable square footage (that tenant’s pay rent on) and the usable square footage within a tenant’s office space.

Tenants in San Francisco pay rent based upon “rentable” square footage. Rentable square feet = Usable square feet + Load factor. In many buildings in San Francisco, especially those with large lobbies and many multi-tenanted floors, have load factors in the 25 – 30% range (sometimes even higher). Think about, that means in many cases the rent you pay goes up by 25 – 30% or more than the usable square footage within your office space.

How do tenants minimize this cost? First, the fastest way to reduce your load factor is to lease a full floor space (instead of a suite on a multi-tenanted floor). Forget multi-tenanted floors, if you can avoid them. With a full floor, there is no long corridor and that means your space is more usable and efficient. Most full floors in San Francisco have lower load factors, typically in the 15 – 19% range, on average.

Case Study:

Scenario 1: 5,000 Rentable Square foot Tenant Leases Space in a Multi-Tenanted floor. With average rents in 2014 in many building nearing $60 per square foot per year, let’s use a rental rate of $60 per square foot per year. This tenant’s rent would be $300,000 per year ($60 x $5,000), or $25,000 per month. Using a 25% load factor, that means this tenant only leases 4,000 “usable” square feet within their suite.

Scenario 2: That same tenant leases a full floor with a 15% load factor. Using the same 4,000 “usable” square feet (so our analysis is apples to apples), that would equate to 4,600 square feet (4,000 x 1.15), using a 15% load factor. This Tenant leases 400 square feet less, equal to about 9% smaller office space, yet benefits from the same 4,000 “usable” square feet, but at a much lower rent amount. At the same $60 per foot per year rental rate, this tenant saves $24,000 per year in rent ($2,000 per month). That is real money in your pocket. And, for larger tenants, the savings are even more dramatic!