Q3 Report: San Fran Office Market Touches Bottom

SAN FRANCISCO-The city’s overall office vacancy rate fell one-tenth of one percentage point during the third quarter to 17.3%, according to Colliers International, which now believes the local office market has touched bottom. Class A, B and C vacancies are now 17.9%, 18.2% and 10.5%, respectively. Each is down slightly from the end of the second quarter, when vacancies were 17.7%, 18.8% and 10.9%, respectively.

“We think that the three-year slide created by the dot-com demise and prolonged by the ensuing recession has halted,” says Brad Van Blois, research director at Colliers International, in the company’s third quarter report. “Although there was only slight positive absorption registered this quarter, signs point to the fact that the worst may finally be over as rental rates continue to stabilize and vacancy rates look to trend downward.”

The third quarter saw 14,774 sf of positive absorption. Net absorption for the year remains negative to the tune 222,482 sf. “Most of the troubled companies have already dealt with their real estate woes by either relocating or downsizing,” states the report, “and with corporate profits returning, companies that have weathered the storm this far most likely will survive, permitting further mass vacancies.”