Both buildings are 24-story, class A properties in the North Financial District. Studley says its negotiated lease rate on the sublease at 150 California is approximately $36 per sf, which is a big discount to market rates. The average asking rate for class A office space in the North Financial District is more than $48 per sf, according to Cornish & Carey Commercial.

Studley co-branch manager Steve Barker tells GlobeSt.com that its all-in cost to get a similar quality space fully built out on a direct basis would have been in the $50s or $60s per sf. "In this market that doesn't make sense," says Barker, who says that the rise in average class A asking rates have outpaced the drop in vacancy as buildings changed hands at premium prices and the new owners push rents in an attempt to increase their rate of return.

Indeed, according to C&C the average class A asking rate in San Francisco has risen 30% to $46.82 per sf from $35.88 while overall class A vacancy has fallen 16%, from 8.8% to 7.4%. Given that plus the credit crunch plus new supply, Barker predicts that asking rates will fall over the next two years.