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Rents For Bay Area Skyline Offices Among Highest In Nation

An office with a view is costing quite a bit more in the San Francisco Bay Area. Skyline rents in San Francisco are the third-highest in the country with average rents of $76.11/SF, according to JLL’s 2017 Skyline report

San Francisco's skyline from the top of Salesforce Tower

Oakland's skyline rents are the eighth most expensive in the country at $54/SF, and San Jose is within reach of the top 10 with rents of $45.56/SF. The other markets more expensive than San Francisco are New York with $87.90/SF and Washington, D.C., with $83.09/SF rents.

Skyline vacancies in the Bay Area are below the national average with San Francisco’s direct vacancy at 8.5%, Oakland at 4.9% and San Jose/Silicon Valley at 12.4%. Buyers are hunting in San Francisco, Oakland and San Jose for quality assets and higher investment returns.

Investors entering San Jose also are seeking value-add and opportunistic investments following a resurgence in downtown San Jose’s transit-oriented properties. Both domestic institutional and foreign investors are chasing assets in the region and over $2.5B in sales occurred during 2016 through Q1 2017.

San Francisco’s skyline continues to expand while Oakland and San Jose’s skylines remain stable, according to JLL. About 4M SF of new skyline product is under construction in San Francisco. The first development in Oakland started in the first quarter. San Jose will add one 120K SF project.

While the demand for high-quality space remains strong, net absorption, the net change in occupied space, slowed in San Francisco in the first quarter. 2016 was the city’s second-best year of skyline office absorption since 2005. Oakland’s fast-paced leasing slowed down as well, while Silicon Valley posted its best skyline office net absorption since 2015.

“Traditionally law firms, financial institutions and other professional services groups were the main drivers of leasing activity within skyline buildings,” JLL Research Director Susan Persin said. “Today, a lack of creative space in more unique and eclectic neighborhoods is drawing TAMI (technology, advertising, media and information) and other venture capital-backed firms into more traditional business districts and high-rise office buildings around the Bay.”

Check out how each of the Bay Area’s major skyline markets stack up below.


Downtown Oakland

Direct Vacancy: 4.9%

2016-Q1 2017 Net Absorption: -6.9%

2016-Q1 2017 Asking Rent Growth: 11%

2016-Q1 2017 Sales Volume: $640M

The supply-constrained Class-A office market in Oakland has pushed asking rents up by 75% since 2012, according to JLL. Vacancy rates are expected to dip below 4% by 2018, new office developments will bring 1M SF of Class-A assets to the skyline market within the next two years.

“Until then, market fundamentals are expected to remain tight for both trophy buildings and rehabbed Class-B buildings alike, all of which have seen strong demand from a wide array of tenants,” JLL Managing Director Sam Swan said.

Developers recently broke ground at 601 City Center, and 1100 Broadway is expected to start construction in 2018.

San Jose

Downtown San Jose

Direct Vacancy: 12.4%

2016-Q1 2017 Net Absorption: 1.4%

2016-Q1 2017 Asking Rent Growth: 21.2%

2016-Q1 2017 Sales Volume: $104M

Tenant activity has largely focused on full-floor, Class-A suites, but ever since Google said it would build a campus that could be 6M SF to 8M SF, developers and investors have had renewed interest in downtown San Jose. Many tech firms are migrating away from overheated submarkets, making San Jose’s central business district a major urban hub.

“With the BART extension eventually connecting to Caltrain in the CBD and the city dedicated to revitalizing the area with new amenities, open public areas and residential development, Downtown San Jose is transforming itself into a thriving innovation center where talent can live, work and play,” JLL Research Manager Christan Basconcillo said.

San Francisco


Direct Vacancy: 8.5%

2016-Q1 2017 Net Absorption: 4%

2016-Q1 2017 Asking Rent Growth: 3.9%

2016-Q1 2017 Sales Volume: $1.8B

San Francisco’s skyline market has had the most robust activity in the region, especially for creative and co-working spaces, and absorbed more than 1M SF in 2016. By year’s end, three new buildings will add 2.2M SF.

“The city’s biggest hurdles include cost of living, infrastructure and [a] tight labor market,” JLL International Director Chris Roeder said. “Continued growth from homegrown headquarters companies, VC-backed technology firms and Valley-based expansions will drive both economic and real estate growth in the near term.”