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Level Records Mark Q2

San Francisco Office

We asked Cushman managing broker Mark McGranahan about his big takeaways from Q2, and he tells us there's still strong demand in S.F. driving prices higher, although more traditional tenants are being more cost conscious and looking focused in lower-priced markets or shrinking their footprints. Meanwhile, high-growth tech tenants are still less price sensitive and focused on creating the right work environment to build their product and business, he says. (Can a tech office exist without funky furniture and ironic video games?) Market-wide, the overall vacancy clocked in at 8.9%, the lowest level since Q2 '01.

The quarter was also marked by record-breaking leasing and the surge of companies moving into spaces, causing the needle to move in a big way. The overall vacancy rate in non-CBD submarkets dropped to 8.6%, finally dipping below the CBD’s 9%, the first time since 1999 that has occurred. (Big moves included Practice Fusion, Illumina, Eventbrite, Cengage Learning. and Lyft.) Leasing registered a robust 3M SF during Q2, the highest level since Q1 2000. In addition to the gigantic 714k SF Salesforce lease at Salesforce Tower at the start of the quarter, other notables included LinkedIn (450k SF), Splunk (182k SF), and Uber's expansion (131k SF).