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SF Shows Persistent Weakness in Market

SAN FRANCISCO-The results are in. The first three months of 2002 showed no improvement in San Francisco's commercial real estate market. There is now a vacancy rate of 21%.

By Michelle Savage | Updated on April 09, 2002

SAN FRANCISCO-According to Grubb & Ellis Co.’s 1Q 2002 report on the San Francisco office market, basic market activity showed persistent weakness.

“The San Francisco office market deteriorated further during the first quarter of 2002, but the bottom of the market may now be in sight,” says Colin Yasukochi, Research Director. “Businesses continued to shed excess office space during the first three months of 2002, resulting in nearly 925,000 sf of negative net absorption. This pushed vacancy to a new high of 21% and put downward pressure on lease rates, which fell approximately 11% to $33.53 for class A and $23.77 for class B when compared to the 4Q 2001.”

According to the report, gross leasing activity in 1Q 2002 was only 800,000 sf, nearly 40% lower than the 2001 and 65% lower than the 2000 quarterly average. The average transaction size fell from 8,800 sf in 2001 to 7,100 sf in 1Q 2002, reflecting the absence of large tenants in the market.

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