Large Office Space Becoming Scarcer In San Francisco As Tech, Coworking Vie For Offices
While tech continues to drive leasing activity in San Francisco, coworking companies are taking large slices of office as well.
WeWork signed an 18-year lease for 251K SF at 400/430 California St., the largest lease of the first quarter, and has already signed another lease for 76K SF at 353 Sacramento St. during the second quarter. The company has another potential lease in the works at One Post St. WeWork has a footprint of over 1M SF, making it the fourth-largest private lessee in the city, according to a report from Cushman & Wakefield.
Industrious signed a lease for space at 1700 Montgomery St. during the first quarter, according to a report from Newmark Knight Frank. Werqwise, Canopy and Mindspace will open, or have already opened, locations in San Francisco during the second quarter. Nine coworking companies are actively looking for a total of 450K SF, according to Newmark Knight Frank.
The rest of the year will be a fight for the remaining large blocks of space, which are becoming few and far between. About 18 potential tenants are looking for blocks of 100K SF or more, but there are about 10 available options that fit these requirements, according to Cushman & Wakefield.
New large-office products could become scarce in the coming years. As of March, about 2M SF remains under Prop M’s large-office allocation cap, according to Cushman & Wakefield. About 4.1M SF of pending projects have the potential to use up the remaining allocation for 2018.
About 4.7M SF is still under construction with 1.9M SF expected to be completed by the end of the second quarter. 181 Fremont, 505 Brannan, 510 Townsend St., 100 Hopper St. and 1800 Owens are expected to deliver at 100% pre-leased.
The Park Tower and Oceanwide Center are among the largest future office products, and Park Tower is generating interest from Amazon, Facebook and Google. Oceanwide Center will be one of the only mixed-use office projects to deliver in 2021 and will provide 1.1M SF of office.
Class-A asking rents were above $70/SF during the quarter. Some creative office landlords have pushed rents up 5% to 7% within the last 12 months, according to a report from Kidder Mathews. Class-A full-serviced rents ranged from $60/SF to over $100/SF along Market Street depending on the level and building type.
A creative office space on the sixth floor of 153 Townsend has full-service rents in the high $70/SF while rents on the lower floors of 345 California are running about $68/SF.
Class-B rents ranged from the high $50s to low $80s depending on location and floor leased, according to Kidder Mathews. Creative Class-C offices in South of Market were in the mid- to high $60s, but well-renovated spaces have been able to garner rents in the $80s, such as in offices around South Park.
Check out the first quarter’s top 10 leases of 50K SF or more below:
CORRECTION, MAY 3, 5:20 P.M. PT: A previous version of this article incorrectly stated WeWork's rank for leases in San Francisco. The company is the fourth-largest lessee in the city. The article has been updated.