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Market Tightens for Spaces Under 4,000-SF

SAN FRANCISCO-A recent report by Starboard Commercial Real Estate indicates that smaller office suites are becoming a valuable commodity in downtown San Francisco.

By Michelle Savage | Updated on December 21, 2001

SAN FRANCISCO-While vacancy rates have risen dramatically across the country, office suites under 4,000 square feet are becoming scarce, according to a report by Han Hansson of Starboard Commercial Real Estate. Despite a city-wide overall vacancy rate of 20%, the vacancy rate for Downtown spaces under 4,000 sf is a relatively tight 7.64%, according to the report.

“Unlike the over-building years of the 80¹s that was not based on actual need but on tax advantages and liberal loan availabilities, the 1998-2000 office expansion was based almost exclusively on the needs the expanding tech sector,” says Hansson. “This sector required large suites of 10,000 square feet or more to accommodate their dreams of being the next Microsoft.”

Alas, most of their dreams were not met, says Hansson, leaving landlords to face high vacancies in spaces that do not fit the current needs of users and are not inexpensively or quickly convertible. As a result, rental rates are way off. Today, the average rental rate stands at $31.00 per sf, where it was before the dot-com boom began.

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