SAN FRANCISCO—Strong leasing activity tightened available space supply during the second quarter and steepened the upward rental rate trend. So says a recent San Francisco office market overview from CBRE. “High-tech companies expanded more aggressively throughout the city and were responsible for eight of the 10 largest leases during the quarter, further depleting both new and existing office space supply.”

More than 1.3 million square feet of new construction space was pre-leased this quarter by three high-tech firms and when combined with existing space, the high-tech sector was responsible for 60% of 4 million square feet overall, says the firm's report. That compares with 50% and a quarterly leasing activity average of 3 million square feet in 2013.

Looking ahead in the second half of the year, CBRE says that the high-tech industry will continue to dominate the office landscape. “Within the next 12 months, four additional new construction projects are expected to deliver 1.3 million square feet to the market, though this space is already 82% pre-leased and therefore not expected to significantly ease supply constraints.”

The firm points out that if demand holds steady during this time, rental rates are expected to push even higher. “This will be an important test to determine how much higher asking rates can climb before hitting a demand resistance level.”

Continue Reading for Free

Register and gain access to:

  • Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

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.