Are We Approaching 1998 Levels?

The continued demand for office space Citywide is driving rents upward while vacancy is decreasing. The first $50 per square foot South of Market lease has been inked. What this means is that owners throughout the region and beyond will continue to raise their rents if they haven’t already.

Tenants touring South of Market who are unaware of current market conditions will now be faced with sticker-shock. SOMA tenants will now either “pony-up” or be touring elsewhere. This past quarter, my tenants were more active Downtown and in the Mission as inventory and rents here are more tenant-friendly. Currently, one tenant has taken the plunge and is currently in escrow for their own property, stepping-off the real estate merry-go-round and becoming their own landlord. I see this trend continuing as inventory from the previous five years is still coming online, making this an ideal time to become an investor or owner-user (…).

My Predictions For The Second Half 2011?

Despite the positive news above, we still have factors holding-down the market such as unemployment, the domestic economy, and global economic issues. We still have citywide vacancy over 13%. The unresolved domestic debt ceiling issues could impact the economy negatively, affecting the commercial real estate markets. Rents will continue to rise, vacancy will drop even lower in the single-digits in some submarkets, and investment activity will remain strong (…).

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