It's all blue skies in S.F., but there may be two big clouds forming: lower-credit tenants and less margin for error for landlords, JLL managing director Greg Fogg tells us.

We joined Greg in his office and got the good news first: Q3 average asking rates spiked 8.6% over the year to $60.91, with 522k SF of net absorption, making it the 17th quarter of positive net absorption (the longest streak on record). Thank several large move-ins last quarter (Salesforce at 50 Fremont, Braintree at 123 Townsend). Overall vacancy rates were 10.4%, but that should fall to single digit in Q4 after Twitter occupies 1 Tenth (below) and Airbnb expands inside its HQ. JLL is forecasting 5.4% rent growth for 2014. Fundamentals are strong right now—especially if you are an owner, says Greg.

But he thinks there's more risk in the market than there's been in a long time, given the underlying credit base of tenants (nine out of the top 10 transactions in 2014 have been tech). Meanwhile, pricing is back at a high-water mark, at or near peaks seen in 2007. Greg says supply and demand is a bit of musical chairs; if the music stops right now, there won't be enough seats. (And everyone will relive the worst part of childhood birthday parties.) There aren't enough large blocks up for grabs, which creates panic and fast movement by tenants who end up losing spaces in competitive situations.

Another red flag is the implied job growth that's been built into a lot of these leases; it's what Greg (snapped at the E&Y conference a few weeks ago) calls reactionary leasing. The primary motivation seems to be to get to an exit via an M&A or IPO—and that focus results in aggressive hiring. It's like a race to maintain first mover advantage and get to the exit before anyone else enters the market, he says, and hiring is a big part of winning that race. All this has contributed to fast deal making. It's not about careful analysis of what solution is going to be the best from a cost prospective. This frenzied leasing creates upward pressure on rental rates. In the next 18 to 24 months, he expects to see more of the same.