Vacancy Continues to Rise, Rates Continue to Fall

SAN FRANCISCO-The San Francisco office market continued to struggle during the first quarter, according to the latest report from Cushman & Wakefield.

Vacancy rates continued to set record highs, rising to 22% citywide and 20.3% in the CBD, where full-service rates fell another 3.8% to $30.60 per sf. The rise in vacancy was fueled by the delivery of about 300,000 sf of vacant new office space, according to the report.

Mark McGranahan, a senior director of office leasing with C&W, says the good news is “class A direct view space is still scarce and commands a significant premium over commodity space.” Everywhere else, however, the situation continues to give tenants the opportunity to upgrade, renegotiate or renew at lower rents. “While unreasonable and unprofitable tenant demands are not going to be embraced by landlords, thoughtful requests based on realistic alternatives will meet with positive renewal or restructure results,” says Dick Robinson, another senior director of office leasing with C&W.