soma update q3 10 eh
TRANSCRIPT
Elizabeth Hart [email protected] 415.513.2170
SOMA Office Market Update – 3rd Quarter, 2010
Submarket Update Q3 2010
Availability
Market Statistics
Total Vacancy
(sf)
Class A Asking Rents
Class B Asking Rents
SOMA 2,548,733 $34.00 $30.00
SAN FRANCISCO 11,973,126 $35.64 $28.73
Leasing Activity Trends Soma leasing activity was strong in the 3
rd quarter with increased transaction velocity in all size ranges. Zynga inked the
largest San Francisco transaction since the end of 2005, by taking 270k sf of space at 650 Townsend. With Zynga’s predominantly open plan, this equates to room for roughly 2,000+ employees. Asking rates have increased across brick & timber creative spaces, while commodity spaces with dropped ceilings have maintained steady asking rates. The delta between asking rates and completed transaction is narrowing. However, there are still other creative ways to add value to the transaction for tenants beyond the “face rent”. Of the total availability in Soma, only 24% can be categorized as creative, forcing tenants to weigh location versus space aesthetics. Space within proximity to Caltrain is very tight, driven not only by organic growth within San Francisco but also by companies entering the market from other locations that want to take advantage of access to a larger talent pool via easy public transportation. From a Bay Area perspective, rents in downtown Palo Alto continue to be robust at a full service average rent of $74.28, while downtown Mountain View’s average is $51.84. Beyond the amenities and access to talent, one can quickly realize why many Bay Area companies take a hard look at locating in Soma/San Francisco versus moving to the Silicon Valley.
Significant SOMA Lease Transactions
Tenant Square Feet Type Location
Zynga 270,000 Direct Lease/Growth 650 Townsend
United Business Media 36,620 Direct Lease/Growth 303 Second Street
Cisco Systems 31,891 Direct Lease/Expansion 185 Berry
Outcast Communications 21,568 Direct Lease/Expansion 123 Townsend
650 Townsend, San Francisco, Zynga Zynga inks the largest SF transaction of this year at 650 Townsend at 270,000 sf. Terms are highly confidential and have not been distributed.
Total Inventory
(sf) Availability
(%)
Net Absorption
(sf)
SOMA 10,463,312 24.36% 433,162
SAN FRANCISCO 82,878,820 14.45% 459,426
SOMA Historical Vacancy versus Asking Rates
$25.00
$27.00
$29.00
$31.00
$33.00
$35.00
$37.00
$39.00
2Q '0
7
3Q '0
7
4Q '0
7
1Q '0
8
2Q '0
8
3Q '0
8
4Q '0
8
1Q '0
9
2Q '0
9
3Q '0
9
4Q '0
9
Q1
'10
Q2
'10
3Q '1
0
Askin
g R
en
tal
Rate
s
12.00%
17.00%
22.00%
27.00%
32.00%
Vacan
cy R
ate
Asking Rents Vacancy
Elizabeth Hart [email protected] 415.513.2170
SOMA Office Market Update – 3rd Quarter, 2010
Submarket Update Q3 2010
185 Berry, San Francisco, Cisco Systems Cisco continued the expansion of their SF presence by expanding an additional 31,891 sf for a total footprint of 68,891 sf at China Basin Landing.
Thank you to clients in Q3 2010:
Q4’10 Forecast Continued increase in leasing velocity and increased asking rates as real estate market continues its recovery. Creative spaces and those within close walking distance of Caltrain continue to see rate increases at a faster velocity than commodity office products and those with inferior public transit. The desirable areas of Soma expand further west due to Zynga’s large presence at 8
th/Townsend.
San Francisco Vacancy by Submarket
14.72%
10.53%
9.61%
19.55%
11.94%
24.36%
North FinancialSouth FinancialN Waterfront -Jackson SqVan Ness - Civic CenterUnion SqSoma
Large blocks of space like 680 Folsom (400k), 370 3rd
(373k), and 500 Terry Francois (281k) contribute to Soma consisting of 24.36% of the vacancy in San Francisco. Almost all of Soma’s tenants cannot take advantage of these vacancies, since the spaces are not divisible or ready for occupancy. The most desirable spaces are those that cater to 2-15k tenants and are built out ready for occupancy.