The San Francisco office market continues to build momentum into 2024. Net absorption was positive led by OpenAI's occupancy of 486K SF in Mission Bay, while vacancy increased to all-time highs and availability stayed flat quarter-over-quarter. Given the vast amount of space on the market asking rates continue to decrease. The technology sector, heavily impacted by layoffs and economic pressures, continues to face difficulties, influencing market recovery. Building sales are reshaping the investor landscape, providing opportunities for buyers to reset rental rates amidst a growing demand for flexible lease terms and financially attractive sublease options. https://lnkd.in/g3wh_dXc #sanfranciscobayarea #office #occupiers #CRE
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The San Francisco office market is building momentum as we enter the final quarter of 2024. Despite OpenAI's 318K SF lease in Mission Bay, net absorption remained negative. While the number of large deals has increased in 2024, in Q3 vacancy continued to creep higher, while availability stayed flat. With a significant amount of space putting downward pressure on rents, we saw a slight decrease in the average asking rate. After several challenging quarters, the San Francisco office market finally received some positive news. Major employers like Salesforce and Amazon are requiring some departments to return to the office 4-5 days a week providing a much needed boost to foot traffic in the CBD submarkets while the Federal Reserve's recent interest rate cut will help ease financing conditions. See below for the full report! #office #occupier #CRE #sanfranciscobayarea
Q3 2024 San Francisco Office Market Report
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Sorry to Say, the San Francisco Office Market is Not Getting Better…just yet A recent article in Bisnow July 8, 2024 cited San Francisco Class-A office vacancy increasing for the 10th consecutive quarter, “as more than a third of the city's office buildings remain empty. The vacancies, brought on by layoffs and hybrid work, are expected to remain elevated through the end of the year. Placer.ai’s monthly data shows that San Francisco office workers are coming into the office the least of any of the top 10 metros, with visits down 49.2% in June compared to the same month in 2019.” There ae millions of square feet of tenants looking for office space, but for the most part there is extensive downsizing. I read in another recent article that there are over 1100 Artificial Intelligence companies now based in San Francisco. Then to further depress us in the office building industry, July 9, 2024 headlines in Biznow “Billionaire Investor Howard marks Says 70% Discount On Offices Might Not Be Enough.” Marks is the co-founder of Oaktree Capital Management, “which specializes in distressed lending, and has $192B of assets under management. Forbes places Marks’ net worth at $2.2B.” I went to Google to find out how I could invest in Oaktree but “hey had no individual clients”. Darn! #SanFrancisco; #Office; #OfficeLeasng; #AI; #SIOR
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NYC Office Market "Roars" Back to Life. 🏙️ I love stories like this (article in comments 👇 ) because they validate our Firm's investment thesis: people eventually have to come back to the office, which is a partial driver of core multifamily deals. That said, I think NYC is fundamentally unique. When I was at Goldman, the NYC team always wore suits and ties, and there was a different energy—culturally distinct from the team in San Francisco. Not better, just different. So, while Manhattan’s recovery is promising, I’m not convinced we’ll see the same trends play out in other cities. What happens in NYC may stay in NYC, though I'm cautiously optimistic. Seattle - a major market we love - just hit ~60% of pre-pandemic foot traffic. Good, not great. But getting there. San Francisco office still at a 36% vacancy rate. And, anecdotally, I have heard that the big leases we keep hearing about are (mostly) sub-leasing of other people's spaces, which isn't quite the same story. What are people seeing in other office markets? Are companies bringing workers back, or are vacancies still high? 👇
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The office market downturn is entirely driven by changes in demand. The market is shaped by the supply/demand dynamic. Limited supply and strong demand (San Francisco in 2019) leads to strong rent growth and increasing asset values. Excessive supply and weak demand (current state) leads to declining rents and plunging asset values. What’s different about this downturn is it’s not related to a business cycle. It is due to a structural change in where people work, specifically in how people who formerly worked in offices now work from somewhere else. The office market is in the early stages of adapting to the new normal. It will take years to adjust such that supply levels are healthy in relation to demand. In the meantime, tenants will have outsized leverage. #lowfogg #office
Big Tech Is Downsizing Workspace in Another Blow to Office Real Estate
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San Francisco continues its promising start to 2024 with several signs pointing towards a turning point in the city’s office market recovery. Four 100k+ sf leases from the City of San Francisco, Scale AI, Rippling and Orrick set the pace for the quarter with a combined 642k sf, marking the third straight quarter of leasing growth. Positive momentum is expected to continue with more than 6.1 msf of tenant requirements in the market. Additionally, the percentage share of remote job postings has now fallen below 20% for the first time since Q4 2021 at 19.4%, outlining the continued trend of return-to-office. However, low investment volume in the office sales market shows a continued disparity between potential buyers and sellers. Ross Robinson Dina Simoni Gouveia Mark McGranahan Nick Slonek Avison Young #sanfrancisco #realestate #commercialrealestate #avisonyoung
San Francisco Office Market Reports | Avison Young US
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Downtown L.A.'s office vacancy rate has reached a staggering 32.8% as major companies continue downsizing. Wedbush Securities is the latest to make a shift, vacating its iconic 100K SF headquarters in DTLA for a 20K SF space in Pasadena, designed for hybrid work. This trend highlights the ongoing transformation of the office landscape, with flexible and remote work models driving change. As businesses rethink their office needs, the future of downtown office space remains uncertain, with Greater Los Angeles experiencing its ninth consecutive quarter of negative absorption. Bio: https://lnkd.in/eB3g9bP3 Google Business Profile: https://lnkd.in/egn5jSck LinkedIn: https://shorturl.at/bmDMV Facebook: https://lnkd.in/eGTqGWuN Instagram: https://lnkd.in/eZMXQpjn TikTok: https://lnkd.in/ejfsyqfM #commercialrealestate #commercialproperty #CommercialLand #commerciallandforsale #warehousespace #officespace #flexspace #industrialspace #sandiegocommercialrealestate #sandiegorealestate #realestate #cre #realtor #realestateagent #realestateinvesting #property #commercial #commercialproperty #realestateinvestor #business #investment #propertymanagement #investmentproperty #residentialrealestate #forsale #retail #entrepreneur #construction #officespace #realestatebroker #EconomicInsights #InflationAnalysis #FedPolicy
Downtown L.A. Office Vacancy Rises as Downsizing Continues
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Shout out to Katie Burke for coming to Philly to investigate whether national headlines about Philly's presumed "underperforming" office market are true. The verdict? It's fake news. "Kastle Systems" has been persistently cited to track office recovery, yet their market share varies greatly across their U.S. markets. If you have a 20% market share in Market X and directly compare it to an 80% market share in Market Y, that does 𝗻𝗼𝘁 produce accurate reporting. Their reporting is misleading and doesn't capture Philly's actual story. Costar's leasing, vacancy, and housing, and Placer.ai pedestrian data tell a more comprehensive story. In fact, Philadelphia's office vacancy rate is 300bps below the national average. 𝗔 𝗳𝗲𝘄 𝘁𝗮𝗸𝗲𝗮𝘄𝗮𝘆𝘀: • Of the top 20 U.S. metros, Philadelphia has the 4th 𝘭𝘰𝘸𝘦𝘴𝘵 availability rate, trailing only Saint Louis, Baltimore, and Minneapolis. • Developers have delivered 1,600 new apartment units in the Rittenhouse/Logan neighborhoods (the "CBD") since 2021, and 1,440 have already been leased. Renter demand is absolutely there and has been growing. • A walking tour of Philly's downtown tells a more accurate story than inaccurate data reporting. Katie does a great job covering this from a "boots on the ground" perspective, layered with local insights from Center City District, Brandywine Realty Trust, and OCF Realty. https://lnkd.in/eJ9CbrWA
Why Things Are Getting Sunnier for Philadelphia’s Office Market
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I’m often met with confusion when I tell people I buy office buildings. ”Isn’t the office market about to collapse?” Here’s why the “conventional wisdom” is flat wrong on this. You have to view the office sector with nuance. — Downtown trophy buildings *are* in trouble — Suburban offices are where the opportunities are Institutional capital has written off the entire sector, and the news sentiment is piss poor. That's EXACTLY why my fund Sentinel is diving in head first. Here's the context: → Plenty of companies still need office space → Staff want easy commutes, not 45-min slogs downtown → Suburbs offer a higher quality of life at lower costs So where are the opportunities? Definitely not NYC, LA and SF. They accounted for 32% of the office space that went vacant in the entire country during Q1 2023. Three markets out of 384 caused ⅓ of the problems! The concentration in these markets makes for great headlines, but skews overall perception. I'm laser-focused on the Midwest, South, and Mountain West. These regions all boast: → Steady economic growth → Affordable cost of living → Thriving local communities By carefully acquiring properties in these markets, we're able to: 1. Buy at a significant discount to replacement cost 2. Lock in long-term, stable leases with high-quality tenants 3. Deliver superior risk-adjusted returns to our investors Investors are throwing the baby out with the bathwater. Just because some offices are doomed doesn’t mean the whole sector is. When others are fearful, it's time to be greedy. And we're gobbling up the best assets at prices that would make Warren Buffett proud. — Am I wrong on this one? Would you bet on downtown or suburban markets? Let’s get a debate going P.S. I hope you all had a fantastic Fourth of July! #USA
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What’s happening with office space in San Francisco? 🌆 Uniquely Occupier Demand & Vacancy are on the rise! 📈 Demand is surging - especially in the tech sector, with nearly 90 companies securing VC funding. This has led to a 46% increase in active requirements and a 65% spike in touring activity year-over-year. 🏢 Vacancy rates are also increasing, with notable spaces like Google's return of 300,000 square feet at One Market Plaza. Currently, there's 8.5M square feet of sublease space available. Despite the uptick in availability, prime locations remain incredibly competitive, achieving rental rates in the $100's per square foot annually. The North Financial district, comprising 31% of SF's office inventory, has seen 52% of all lease transactions this year. Ping me for full market report! 📊 #SanFrancisco #OfficeSpace #RealEstateTrends
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The office market is a war zone. $38B in defaults and foreclosures. Worst since '08. Culprits: High rates, weak demand. A deadly duo. Moody's: 35% of office CMBS loans paid off in '22. Worst since '07. But smart money is pouncing. Palisade Group: Seattle office, 26% discount from '02. Carolwood: L.A. tower, $148M, 45% less than '14. The contrarian play? Conversions. Cubicles to condos. Offices to apartments. But that's just the beginning. Think outside the box. Offices to hotels. Workspaces to warehouses. Desks to data centers. Retail. The possibilities are endless. The math is clear. At these prices, alternative investments are a goldmine. Chasing tenants is a sucker's bet. Smart money is zagging while others zig. Offices are toxic. Adaptive reuse is the future. $38B in distress is the tip of the iceberg. Creative conversions are the lifeboat. The bigger the carnage, the bigger the opportunity. Fortune favors the bold in the office apocalypse. Hotels, warehouses, data centers - the world is your oyster. The office market is dead. Long live the office market. Adapt or die. The choice is yours.
Office-Loan Defaults Near Historic Levels With Billions on the Line
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