Rise In Office Tours By 112% Hints At Possibly Massive S.F. Recovery
After reaching rock bottom in terms of office tenant demand in 2020 due to fallout from the coronavirus pandemic, San Francisco shows potential signs of a strong recovery based on a VTS Office Demand Index report, which captures aggregate tenant interest based on office property tours by prospective tenants.
VTS’ VODI metric, which tracks both in-person and virtual tours, indicates that interest in S.F. office space grew by 112% between Dec. 31, 2020, and Feb. 28, 2021. The tours tend to lead lease signings by at least six months and can be a foreshadowing of leasing activity before it happens, according to a VTS spokesperson.
The report tracked seven major markets nationally, finding that though S.F. experienced the most severe plummet in office demand from pre-pandemic to the nadir of the crisis, the city’s VODI metric has had the greatest rebound — by 95% — from the lowest point around mid-2020 to February 2021.
“While it is encouraging that San Francisco has made up almost everything lost since the pandemic started, it is important to remember that demand in San Francisco was depressed leading into the pandemic,” VTS Chief Strategy Officer Ryan Masiello said in a statement. “After peaking in early 2019, demand slowed throughout the rest of 2019 and into early 2020, and then the pandemic hit. It will take several more months of exponential growth to get back to pre-2020 levels of demand.”
Overall, the VODI metric data shows that office demand nationally is 38% lower than just before the pandemic. However, compared to May 2020, which was 85% below pre-pandemic levels, the gains are significant. The national monthly growth rate between this January and February was 29%, suggesting that a recovery is indeed underway with vaccinations in progress and the warmth of spring approaching.
Of all the core markets tracked by the report, early 2021 growth rates were most robust in New York City and Seattle, jumping 120% and 183%, respectively, since Dec. 31.
“While we saw some growth in demand in the back half of 2020, the exponential increase in the first two months of 2021, [in] combination with the announcement from the Biden Administration that all Americans will be eligible for the vaccine by May 1, 2021, is providing confidence that a meaningful recovery is on the horizon,” VTS CEO Nick Romito said in a statement.
While the VTS report may foretell an upward trajectory in demand for S.F. office space down the road, the present numbers are still dim. Between January and February 2021, office vacancy in S.F. increased by 18.6% and availability by 24.3%, according to a report from CBRE. The report stated that companies are reassessing their post-pandemic space needs as five tenants dropped out of the office hunt resulting in a tenant demand drop by 47K SF in February.