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SAN FRANCISCO-Office sublease space in San Francisco offers discounted leasing opportunities to tenants with flexibility and shorter duration space needs. So says Colin Yasukochi, CBRE director of research and analysis. He tells GlobeSt.com that “It's become a more important option given the large rental rate increase and large available supply decrease that favors landlords.”
The average sublease space currently on the market is priced 24% less than direct space, with an annual asking rent of $39 versus $51 per square foot, fully serviced, he says. “The rental rate also declines along with the number of years the sublease is available for. Even though some tenants may require a longer lease, additional term is often available direct from the landlord, making a blended rate potentially more cost effective.”
The analysis of San Francisco office sublease space did yield some surprising results, he says. “Direct rates from the market low point in early 2010 compared to the first quarter of 2013 rose by an astounding 65%. Over that same time period, sublease rates rose 77%, reflecting tight space conditions and tenants seeking options with greater flexibility and shorter terms.”
It's well documented that high-tech firms are driving market performance in San Francisco, but, according to Yasukochi, they are also the largest sublessors of space.
“Of the 1.1 million square feet available for sublease, 34% is from high-tech firms,” he says. Outgrowing their current space is the primary reason for their subleasing activity.”
New development is beginning to solve the space shortage problem, according to Yasukochi, but it will be one to two years into the future before it makes a meaningful impact on market conditions. “Keep an eye on sublease space trends, it's historically been an early indicator of market health.”
Check out the graph from CBRE below for more.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
