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The San Francisco office market posted 553,825 square feet of negative absorption (or net change in occupied space) during the first quarter, which was the third consecutive quarter the City experienced negative absorption. The absorption loss was mainly due to several businesses downsizing or closing their operations. PG&E was the largest contributor; the company vacated 80,000 square feet at 123 Mission Street, and consolidated into its other locations at 77 Beale and 245 Market Street.
Although we are in a tenant’s market, tenant activity is slow. Due to the uncertainty of the length and depth of our current recession, tenants are cautious to make long-term decisions. As a result, leasing activity slumped and the average lease term contracted. Leasing activity volume only amounted to 714,968 square feet for the quarter, compared to the City’s typical average of 1.6 million square feet. In addition, average lease terms decreased. The average lease signed during the first quarter was only 42 months compared to an average of 60 months.
The path to recovery for the San Francisco office market is still distant. The office sector will likely feel the aftermath of the credit crunch during the next few months. However, one bright spot is that a minimal amount of new supply will hit the market over the next 24 months.
Contact Tove Nilsen at 415.288.7827 for more information.
  Q1_2009 The Knowledge Report_for email.pdf
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