That is the first of our Six Quick Stats for the third quarter of 2019 released ahead of our full report out within the next few days.
And while the past twelve weeks wasn’t one of mega leasing deals, it was pretty darn steady regarding smaller and mid-sized transactions which is, after all, the bread and butter of the market. Vacancy, meanwhile, fell to its lowest figure during this economic cycle – we have to go all the way back to the year 2000 to find anything below the current 5.3%. The San Francisco average asking rent hit yet another record and remains the highest citywide of any spot in the country – including all of Manhattan (okay, so the Midtown South submarket actually does beat us out slightly!) Speaking of asking rents, adjusting for inflation does change the dynamics a bit as that pricing boom in 2000 was well into three figures in today’s dollars. There are still plenty of investors wanting to buy their way into San Francisco too with the sales market very active and at record pricing.
At a time when there are pronouncements regarding tenants leaving the market and/or expanding elsewhere, year-over-year job growth has been very healthy at +3.4%, led by the office sectors. The fourth quarter will likely bring more of the same though 2020 is going to be a year to watch – global turmoil including continuing trade wars and a rather huge U.S. election. In addition, the numerous Bay Area-based IPOs that have thus far occurred in 2019 haven’t exactly all been stellar successes and there will be some right-sizing to come. But San Francisco is at full employment and tight for office space. With no major office projects likely delivering before 2022, the market will have to adjust to a somewhat slower pace.
Speaking of mega tech markets (and we were, right?), Cushman & Wakefield released a new infographic entitled “The Great Tech Migration” which takes a look at tech and life science companies headquartered in the Bay Area with at least 100,000 square feet here and where they have taken space elsewhere across the U.S. in the past decade.
There has been over 30 million square feet in transactions over that time period outside the Bay Area. Some markets will not surprise anyone – Austin, Seattle, New York City. But others might – Chicago and Dallas for instance. It’s not about low cost of course (though that doesn’t hurt). More than anything it’s a desire to find that talent pool – millennials, college degrees, research institutions nearby – all can play a bigger role than the cost of real estate. Does that mean all of these companies have given up on the Bay Area? Of course not! Over this same time period, they have all actually taken more space here (almost twice as much in fact) than in the rest of the U.S.
Both our Six Quick Stats and our Migration report tie in nicely with this week’s lead stories. Whether late stage or seed funding or somewhere in between, venture capital money continues to flood into San Francisco. It’s out there across the Bay Area but more than anywhere else, within the city proper. There are good and bad aspects to this and Crunchbase breaks it all down. Another great research piece is from CITYLAB on why tech inventors cluster together. This isn’t really a recent development but has a lot of history behind it. And yes, San Francisco and the Bay Area is at the forefront right up there with New York City
Much more news down below too including a story on how robotics will take over a large swath of banking, another retailer filing for bankruptcy and just how much tech talent costs these days. Development activity continues to percolate down in Silicon Valley – especially in downtown San Jose – scroll on down for several stories on that topic.
This post is commentary from the latest weekly edition of our NorCal Newsline, which you can subscribe to for free by e-mailing firstname.lastname@example.org.