Report Says S.F.'s in "A Golden Age"
1. Absorption At Record Highs
Colliers executive managing director Alan Collenette says S.F. eclipsed the annual absorption level recorded for the past 12 years with 2.8M SF of net growth for the year, far exceeding the city’s annual average of about 1.1M SF. The biggest deals of the year came from Salesforce, which inked a record-breaking 714k SF lease this spring; LinkedIn at 222 2nd (which we broke); Twitter at One Tenth; and Google at One Market. Colliers reported 5.1M SF of office space under construction at year-end with another 12.6M SF either proposed or in various stages of planning.
2. Rents Are Up
The report states overall weighted rental rates for Class-A assets increased 2.6% for the quarter and annualized rents continued to climb, finishing the quarter (and year) up 18.4%. Due to new construction hitting the market, the vacancy rate remained flat this quarter at 7.5%. Vacancy has decreased for four straight years, the report said, and that’s a 51% shrinkage rate since the most recent peak of 15.2% in 2010. Above, Hines' Paul Paradis at the Salesforce lease announcement.
3. Year Ends With 50 Office Sales
Job growth, the rise in leasing levels and prices brought lots of capital to the market. The Financial District continued to dominate investment sales, accounting for more than half the sales during Q4. The two largest deals that closed were in the south Financial District, where 50 Beale sold for $395M, or $595/SF, and 405 Howard (above) for $390M, or $748/SF. Sales prices will continue to climb well into 2015, although sales volumes may slow, says Colliers. There were a total of 14 office transactions in Q4 for a combined value of nearly $1.9B. This year there were 50 office sales that closed for a total of $5B.