Indeed, the expectation is that they will fall to the point where Downtown space in San Francisco will cost the same as it does in Downtown Oakland. Both cities are projected to end this year with Class A office rates of approximately $30 per sf.
The problem is a lack of demand and a wealth of space. As of this week, Starboard Commercial Real Estate says 15.53% of San Francisco's 62.3 million sf of office space is directly available. When you include sublease space, that figure rises to 23.63%.
The Financial District alone, which holds 26 million sf, sports a direct vacancy rate of 8.93% and an overall vacancy of 15.20%, according to Starboard. In the South Financial District, which accounts for another 14.4 million sf of the total, the direct vacancy rate is 14.06% and the overall vacancy rate is 20.46%.
A recent report by Cushman & Wakefield adds fuel to the fire by saying that the top 10 office markets, of which San Francisco is one, will continue to slow through 2003. According to the report, from fourth-quarter 2001 through the end of 2003, San Francisco's growth is expected to decline from 3.9% to 1.2%.
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