Weak Office Demand Despite Strong Jobs Data
Despite high borrowing costs for businesses and consumers, economic conditions in the San Francisco metropolitan area remain strong and stable. The unemployment rate was 3.9% in May, down from 4.5% three months ago and remains at moderately low levels. The pace of job growth softened to 0.3% year-over-year as 6,000 jobs were added.
Office Vacancy Remains High with Signs of Recovery in Tow
Office Vacancy in San Francisco remains at a historically high level of approximately 30%. In the second quarter of 2024, the total amount of available office space was 36 million SF. Despite these staggering numbers, San Francisco's office market is showing preliminary signs of recovery.
The prime average rent increased to roughly $49/sf. Net absorption was recorded at a positive 207,086/sf. Despite the overall negative statistics, when diving deeper into the numbers San Francisco is starting to show glimpses of its previous self.
Investment Volume Scarce but VC Funding Active
While supply and demand fundamentals look bleak, capital markets are recalibrating with several notable discounted sales over the last couple of quarters. The office sector recorded $155 million in second quarter deal volume in a market that frequently experienced over $1 billion in quarterly investment during pre-pandemic years.
Though investment was comparatively weak, there were a few notable deals in which buyers and sellers agreed on reduced pricing. 300 California St sold for 28.5 million. A 29.8 million loss from its previous sale in 2014 where is sold for 58.3 million.
