Technology Companies Continue to Fuel Tenant Demand
San Francisco’s overall vacancy rate edged down 30 basis points to 5.8 percent. The vacant sublease rate was flat this quarter at 0.8 percent and continues to be well below the high-water market of 5.1 percent reached in 2002, meanwhile the City’s direct vacancy rate shrunk 30 basis points to 5.0 percent.
> LEASING VOLUME
San Francisco experienced strong leasing activity during the third quarter, which translated into nearly 2.3 million square feet of transactions closing. This volume of leasing activity is well above the quarterly 18-year average of 1.8 million square feet. Tenant demand for space in San Francisco continued to grow over the past three months with technology tenants accounting for over 50 percent of that demand in the market.
At the end of the third quarter, San Francisco posted over 341,000 square feet of positive net absorption. Year-to-date absorption hit over 3.6 million square feet in the core CBD submarkets. The North Financial District was the key contributor for the positive net absorption for the City posting over 374,000 square feet.
After reaching an all-time high effective weighted rent during the second quarter, overall weighted rents soften this quarter by nearly 10 percent to $82.17 per square feet. The drop in the overall weighted rents can be attributed to multiple large leases with effective rents of $95 or higher that closed in the second quarter.