"Tenants should negotiate lease terms that require landlords to seek property tax reductions and, if successful, to pass through savings, particularly in the case of anchor or sole tenants," according to the company's preliminary fourth quarter report. "Additionally, while many gross leases contain provisions whereby the tenant is responsible for increases over base year expenses, tenants should seek the benefit of decreases as well. Owners of more than 1,000 commercial properties in San Francisco have asked the Office of the Assessor-Recorder to have their property taxes reduced this year, based on lower building values."

As previously reported on GlobeSt.com, Brookfield Properties has foreclosed on 333 Bush St., while Morgan Stanley, one of San Francisco's largest landlords, is preparing to give back to its lender five major downtown office properties. Due to the short-term debt that was used to purchase over 60% of the commercial office buildings in San Francisco between 2006 and 2008, Studley believes more properties "are bound" to follow a similar path.

"Available space will continue to hit the market in 2010 as companies downsize and renew at smaller footprints, adding to the 20% of inventory that is already available," Studley predicts. "Rental rates will soften and tenant leverage in lease negotiations will remain considerable as buildings transition back to lenders or are sold to new owners at a lower cost basis."