C&C San Francisco Office Q3 2009

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Cornish & Carey Q3, 2009 Market Report

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C&C San Francisco Office Q3 2009

  1. 1. Third Quarter • San Francisco • Office Report SAN FRANCISCO OFFICE Lic #00832933 One Bush Street, Suite 400 • San Francisco, CA 94104 Tel: 415.445.8888 • Fax: 415.445.8886 www.ccarey.com
  2. 2. SAN FRANCISCO OFFICE • THIRD QUARTER TABLE OF CONTENTS Coverage Map 1 San Francisco Market Overview 2 San Francisco Market Summary 3 San Francisco Market Highlights 4 C&C Focus 6 North Financial District Market Summary 8 South Financial District Market Summary 10 North Waterfront / Jackson Square Market Summary 12 Van Ness / Civic Center Market Summary 13 Union Square Market Summary 14 SoMa Market Summary 15 Agent Roster 18 Cornish & Carey Commercial San Francisco Quarterly Report is based on a quarterly survey of competitive office buildings. The data included in this report incorporates not only space presently available on the market, but also space which we have been led to believe will come onto the market in the foreseeable future. Information contained herein has been given to us by the owner of the property or other sources we deem reliable. We have no reason to doubt its accuracy, but make no guarantee, warranty or representation about it. All information should be verified prior to lease or purchase.
  3. 3. SAN FRANCISCO OFFICE • THIRD QUARTER COVERAGE MAP 1
  4. 4. SAN FRANCISCO OFFICE • THIRD QUARTER OFFICE UPDATE AND Q3 2009 IN REVIEW By: Ryan Carmichael, Financial Analyst / Market Research Coordinator San Francisco has certainly experienced the which took less than 90 days to complete, This period affords an incredible pain of the recession, though it is seeing a illustrates demand for life science/lab space opportunity to lock in lower rents for glimmer of light as the third quarter draws remains alive in Mission Bay. What’s tenants who have confidence in their to a close. Unemployment (currently at more, the San Francisco office market business and growth projections. Early 10.1 percent) has more than doubled since experienced a decline in vacant sublease “Blend & Extends” requests are quickly the beginning of 2008 and is now higher space for the first time in seven quarters. becoming the norm for those firms with than the U.S. average of 9.8 percent. While 2010 and early 2011 lease job lay-offs continue in architecture, Class A vacancy in the CBD actually expirations…however its important to engineering, financial and professional dropped slightly in the quarter; however note that not all Landlord’s are pressured service firms, there are signs of increased the excitement is tempered by the steady (or have the ability) to restructure existing employment in technology. Open job increase in available space (space which is leases. The lender(s) on the buildings are requirements for internet and software marketed for lease but still occupied) to more active in the decisions which affect companies are leading the charge and as a 7,072,268 square feet and the citywide cash flow and they also know that with result, an expansion of occupied square vacancy showing an increase to 14.43 each passing quarter the market continues footage for selected firms will likely occur percent from 13.82 percent in the second to edge closer to health. Rents will in 2010. This expansion however remains quarter of 2009. Furthermore, citywide eventually rise; especially for spaces which off-set by the continued “bottom line” class A availability increased to 17.33 are well improved in quality properties….it expense focus across most other industries percent which translates to more than 8.3 continues to be a matter of “when”. and suggests continued job cuts into 2010. million square feet of office space being The increase in M&A activity - i.e. Sun marketed for lease over the next 12 Microsystems, Golden Gate Software, months. At the height of the dot com Oracle - will likely lead to further crash, this number was 10.1 million square consolidations and more negative feet. absorption through Q2-2010. For properties with “shell” or first The third quarter net absorption was generation spaces, it is necessary to negative 511,631 square feet, bringing the provide generous concession packages and YTD total to 2,293,889 square feet. low face rents to compete with “improved” Economic uncertainty and continued or second generation spaces to encourage company downsizing (combined with the forward lease commitments. For owners seasonally slow summer period) translated with access to capital, their success is well into tepid leasing velocity in San Francisco. noted. Tishman Speyer’s 555 Mission The majority of deals inked in the third Street continues to sign deals as noted quarter were prompted by tenants seeking above with RCM Capital, and most recently to restructure in-place lease terms, which Silicon Valley Bank committed to 35,274 in many cases resulted in early renewals square feet for 10 years. These and space consolidation. Three out of the transactions received TI Allowances around five largest transactions of the quarter; $80.00 per square foot. Brown & Toland, Open TV, and Pure Digital were just such deals. In another For the majority of Landlords, there is example, RCM Capital reduced the size of difficulty in obtaining capital for tenant its San Francisco operations by nearly 50 improvements and transaction costs. percent when it inked a deal to move from Liquidity and work-outs with existing its current location at 4 Embarcadero lenders remains of key focus. Tenant Center into its new, 35,130 square feet improvement packages (which once were space at 555 Mission Street. Additional easily $40-$50/sf) are now declining to $20 lease commitments were in subleases, as to $35/sf. In exchange the Landlords are firms cashed in on quality office space reducing their asking rents to entice marketed at heavily discounted rates. The commitments. Class A rates have slip largest of the quarter was the Nektar below $35.00 per square foot at the end of Therapeutics, Inc. sublease of 102,283 the third quarter and will continue to trend square feet of Pfizer’s (first generation) lower, approaching pricing levels not seen space at 455 Mission Bay Blvd. South in the since 2005. Mission Bay submarket. The sublease, 2
  5. 5. SAN FRANCISCO OFFICE • THIRD QUARTER OFFICE MARKET HIGHLIGHTS - LEASING Average Asking Rate 1 2009 2009 Submarket Net Rentable Area * Availability Total Vacancy 3 Total Availability Class A Class B Class C Q3 Net Absorption 2 Y-T-D North Financial District 28,691,601 5,503,938 14.35% 19.18% $35.40 $28.00 $23.00 (124,578) (591,814) South Financial District 24,749,615 3,603,070 10.39% 14.56% $35.30 $28.00 $23.00 148,943 (183,256) North Waterfront/Jackson Sq. 6,840,596 1,119,322 10.56% 16.36% $30.70 $27.00 $24.00 27,780 (207,900) Van Ness/Civic Center 6,817,902 1,290,867 9.53% 18.93% $29.27 $25.00 $23.00 (27,224) (187,332) Union Square 5,825,157 823,584 11.45% 14.14% $30.00 $28.00 $24.00 (119,517) (191,878) SoMa** 10,679,148 3,335,143 31.23% 31.23% $30.30 $27.00 $24.00 (417,035) (931,709) San Francisco Office Market 83,604,019 15,675,924 14.43% 18.75% $34.64 $27.26 $23.75 (511,631) (2,293,889) ** SoMa Inventory includes the following markets: South of the Market; Yerba Buena; Multimedia Gulch; Mission Bay; South Beach; Inner Mission & Potrero Hill Historical Trends Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental Rates 1 2005/Q3 45,134,630 4,934,788 1,408,976 14.1% 464,534 $32.56 Q4 44,794,249 4,644,515 1,246,239 13.2% 303,271 $33.40 2006/Q1 45,181,682 3,802,372 717,040 10.0% 283,495 $33.46 Q2 45,265,952 3,899,723 692,683 10.1% 111,350 $35.27 Q3 45,267,770 3,412,272 583,281 8.8% 213,537 $35.88 Q4 45,278,227 3,224,700 643,023 8.5% 210,841 $36.80 2007/Q1 46,668,376 3,422,734 441,075 8.3% 91,954 $42.02 Q2 46,663,509 3,286,066 487,191 8.1% 92,522 $43.32 Q3 46,663,509 3,083,395 355,421 7.4% 240,597 $46.82 Q4 46,663,509 2,976,387 352,776 7.1% 154,149 $46.82 2008/Q1 47,322,203 2,754,242 365,733 6.6% 209,188 $46.91 Q2 47,595,475 3,243,799 393,792 7.6% (517,616) $46.94 Q3 47,595,475 3,448,110 744,607 8.8% (555,126) $44.07 Q4 48,151,794 4,587,686 841,335 11.3% (1,236,304) $41.26 2009/Q1 48,219,559 4,968,642 1,122,238 12.6% (661,859) $37.02 Q2 48,219,559 5,009,042 1,273,766 13.0% (190,864) $35.49 Q3 48,219,559 4,995,774 1,178,876 12.8% 108,158 $34.64 HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 2 Absorption is based on vacant square footage 3 Vacancy is based on vacant square footage * Includes all Classes of Office Space 3
  6. 6. SAN FRANCISCO OFFICE • THIRD QUARTER OFFICE MARKET HIGHLIGHTS - LEASING BY THE NUMBERS ±102,283 Square feet Nektar Therapeutics, Inc subleased from Pfizer at 455 Mission Bay Blvd. South. The 10-year sublease, which commences upon completion of the project in the second quarter of 2010, illustrates demand for science/lab space remains alive in Mission Bay. 455 Mission Bay Boulevard Significant Leases (By Square Foot) Top Leases for Q3 2009 Tenant Lessor (Sublessor) Address Sq. Ft. Nektar Therapeutics, Inc. (S) Pfizer 455 Mission Bay Blvd S. 102,283 Brown & Toland ( R) American Assets, Inc. 153 Townsend Street 51,871 Open TV ( R) Vornado Realty Trust 275 Sacramento Street 42,565 Pure Digital / Cisco (E) McCarthy Cook 185 Berry Street (Wharfside) 37,500 Silicon Valley Bank Tishman Speyer/ ADIA 555 Mission Street 35,274 Top Pending Leases Tenant Lessor (Sublessor) Address Sq. Ft. Zynga CBRE Investors 550 Terry Francois 130,000 Del Monte Morgan Stanley One Maritime Plaza 100,000 Exploratorium Port of San Francisco Pier 15 & 17 100,000 Goldman Sachs Vornado Realty Trust 555 California Street 45,000 Foley & Lardner Vornado Realty Trust 555 California Street 30,000 Top 5 Contiguous Spaces (vacant/ available in 12 months) Address Lessor (Sublessor) Sq. Ft. 150 Hayes St, 100 Van Ness Ave, 150 Van Ness Ave. Patson Group / Vornado Realty Trust 584,487 1355 Market Street (connects w/ 875 Stevenson) The ADCO Group 955,000 370 Third Street JER/ Lane Partners 366,287 155 5th Street Continental Development Corp. 349,286 650 Townsend Street TMG Partners 274,563 1 Montgomery ( S ) ( C ) Charles Schwab 300,090 ( S ) = Sublease ( R ) = Renewal ( E ) = Expansion ( C ) = Cornish & Carey Involvement 4
  7. 7. SAN FRANCISCO OFFICE • THIRD QUARTER OFFICE MARKET HIGHLIGHTS- SALES BY THE NUMBERS ±116,078 Square feet of class “A” was purchased by Argonaut Private Equity, as 250 Montgomery Street became the first distressed asset to sell in San Francisco. Lender, Real Finance Corporation sold the office tower for a reported $19.7 million or $170/s.f. Lincoln Property purchased the office tower in 2006 for $49 million and defaulted in 2008. 250 Montgomery Street Significant Sale Statistics (By Square Foot) Top Buildings Sales in Q3 2009 (By Square Foot) Building Sq. Ft. Seller Buyer 250 Montgomery Steet 116,078 CBRE Investments Argonaut Private Equity 564 Market Street 59,100 Genaro Mendoza Chelsea Pacific Holdings Top Buildings for Sale (Over 50,000 Square Foot) Building Sq. Ft. Seller Buyer 550 Terry Francois Blvd 282,773 Tishman Speyer GLL Real Estate Partners 120 Howard Street (Note sale) 147,750 Prudential TBD 49 Stevenson Street 121,179 Core Fund Oak Brook Property, LLC TBD Projects Under Construction (By Completion Date) Building Sq. Ft. Owner Location Completion Date Major Tenant 1500 Owens 157,929 Alexandria Real Estate Mission Bay Q4 2009 UCSF - Orthapedics 1 Kearny Street ( R ) ( E ) 94,000 Joseph & Maria Fang NFD Q4 2009 None 455 Mission Bay Blvd. 210,000 Alexandria Real Estate Mission Bay Q2 2010 Nektar Therapeutics, Inc. Projects Planned (By Square Footage) Building Sq. Ft. Owner Location Status 222 Second St. 700,000 Tishman Speyer SFD Planning 350 Mission Street ( C ) 430,000 GLL Real Estate Partners SFD Planning / Marketing Space 350 Bush Street & 500 Pine Street 400,000 Lincoln Properties NFD On Hold 680 Folsom Street ( R ) 350,000 RREEF / CalPERS SFD On Hold 535 Mission Street 307,000 Beacon Capital Partners SFD On Hold Piers 27-31 300,000 Shorenstein Company North Waterfront Planning Foundry Square 3 197,000 Wilson Meany Sullivan SFD Approved / Marketing Space ( R ) = Renovation ( E ) = Expansion ( C ) = Cornish & Carey Involvement 5
  8. 8. SAN FRANCISCO OFFICE • THIRD QUARTER C&C FOCUS – TIER 1, 2 & 3 Energy Star LEED – Certified LEED - Pending 6
  9. 9. SAN FRANCISCO OFFICE • THIRD QUARTER C&C FOCUS – TIER 1, 2 & 3 Energy Star LEED – Certified LEED - Pending 7
  10. 10. SAN FRANCISCO OFFICE • THIRD QUARTER NORTH FINANCIAL DISTRICT MARKET SUMMARY 3rd Quarter, 2009 Vacancy Rate Availability (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q2 '09 Rental Rates1 A 21,546,720 14.4% 10.8% 3.7% 4,006,456 2,903,616 1,102,840 (47,790) (136,359) $35.40 B 6,288,579 14.8% 14.0% 0.8% 1,394,409 1,281,627 112,782 (77,527) 5,503 $28.00 C 856,302 9.1% 8.9% 0.1% 103,073 95,890 7,183 739 7,852 $23.00 28,691,601 14.35% 11.41% 2.93% 5,503,938 4,281,133 1,222,805 (124,578) (123,004) Historical Trends Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental Rates 2005/Q3 19,805,988 2,365,519 507,236 16.7% (41,960) $33.01 Q4 19,817,460 1,922,272 637,961 14.5% 157,926 $34.31 2006/Q1 19,817,460 1,773,127 314,449 12.9% 243,229 $34.75 Q2 19,890,190 1,731,564 337,550 10.5% 108,358 $34.75 Q3 19,895,019 1,557,068 292,971 10.4% 51,837 $36.40 Q4 19,895,019 1,505,161 289,094 9.3% 225,615 $37.00 2007/Q1 20,968,597 1,703,435 202,698 9.0% (3,396) $37.60 Q2 20,968,597 1,654,847 268,598 9.1% (121,277) $43.24 Q3 20,968,597 1,381,444 181,956 9.2% (17,312) $45.15 Q4 20,968,597 1,252,588 177,665 7.5% 83,823 $48.30 2008/Q1 21,482,945 1,294,006 131,722 6.6% 55,817 $48.30 Q2 21,482,945 1,430,829 153,364 7.4% (134,611) $48.30 Q3 21,482,945 1,525,829 477,404 9.3% (286,019) $45.30 Q4 21,482,945 2,075,292 563,406 12.3% (480,054) $42.20 2009/Q1 21,546,720 2,189,346 733,855 13.6% (254,346) $37.98 Q2 21,546,720 2,215,344 844,216 14.2% (136,359) $36.30 Q3 21,546,720 2,320,104 787,246 14.4% (47,790) $35.40 HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 8
  11. 11. SAN FRANCISCO OFFICE • THIRD QUARTER NORTH FINANCIAL DISTRICT MARKET SUMMARY BY THE NUMBERS ±29,776 Square feet was renewed by 24- Hour Fitness at 100 California Street. The renewal will keep the juggernaut fitness club at its current location for 5 years. $35.40 Per Square foot (Full Service) for Class “A” space. This represents a 19.9% year-over-year decline in Class “A” rental rates. 14.4% Class “A” vacancy for the North Financial District submarket. The highest vacancy rate since 2005 for this submarket. CLASS “A” HISTORICAL DIRECT VS. SUBLEASE VACANT SPACE 9
  12. 12. SAN FRANCISCO OFFICE • THIRD QUARTER SOUTH FINANCIAL DISTRICT MARKET SUMMARY 3rd Quarter, 2009 Vacancy Rate Availability (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q2 '09 Rental Rates1 A 20,181,060 11.1% 9.9% 1.2% 3,065,812 2,600,366 465,446 145,018 (9,910) $35.30 B 3,346,323 6.2% 5.9% 0.3% 406,956 390,092 16,864 29,810 (367) $28.00 C 1,222,232 10.3% 10.1% 0.1% 130,302 120,258 10,044 (25,885) (14,965) $23.00 24,749,615 10.39% 9.34% 1.05% 3,603,070 3,110,716 492,354 148,943 (25,242) Historical Trends Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental Rates Q3 20,123,913 1,810,178 562,883 11.8% 112,402 $32.53 Q4 19,772,060 1,934,028 477,212 12.2% (38,490) $33.40 2006/Q1 20,159,493 1,328,836 358,395 8.4% 63,342 $33.40 Q2 19,086,992 1,354,408 325,959 8.8% 41,720 $35.70 Q3 19,094,438 1,271,296 257,646 8.0% (70,444) $36.00 Q4 19,094,438 1,038,200 262,045 6.8% 228,697 $37.10 2007/Q1 19,128,276 991,788 160,721 6.0% 252,536 $42.67 Q2 19,128,276 998,881 142,012 6.0% 13,586 $43.40 Q3 19,128,276 1,157,348 92,021 6.5% 114,922 $47.60 Q4 19,128,276 1,294,077 83,682 7.2% (128,390) $47.60 2008/Q1 19,612,763 1,064,770 149,049 6.2% (32,660) $47.60 Q2 19,612,763 1,153,898 158,734 6.7% 37,426 $47.60 Q3 19,612,763 1,357,040 187,752 7.9% (73,457) $44.20 Q4 20,169,082 1,977,938 203,342 10.8% (410,583) $41.50 2009/Q1 20,181,060 2,089,038 284,973 11.8% (237,133) $37.35 Q2 20,181,060 2,086,629 297,292 11.8% (9,910) $36.20 Q3 20,181,060 1,990,618 248,285 11.1% 145,018 $35.30 HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 10
  13. 13. SAN FRANCISCO OFFICE • THIRD QUARTER SOUTH FINANCIAL DISTRICT MARKET SUMMARY BY THE NUMBERS ±35,427 Square feet was inked by Silicon Valley Bank at 555 Mission Street. The bank will move from its China Basin location at 185 Berry Street into Tishman Speyer’s new office tower upon lease commencement in February 2010 148,943 Square feet of positive net absorption for all building classes in the South Financial District. 11.1% overall vacancy rate in Q3 (includes sublease space and all building classes), a decline from Q2’s mark of 11.8%. CLASS “A” HISTORICAL DIRECT VS. SUBLEASE VACANT SPACE 11
  14. 14. SAN FRANCISCO OFFICE • THIRD QUARTER NORTH WATERFRONT/JACKSON SQUARE MARKET SUMMARY BY THE NUMBERS +11,683 Square foot lease was signed by E & M Electric Machinery, Inc., at 55 Francisco Street. 27,780 Square feet of positive net absorption for all building classes in the North Waterfront / Jackson Square submarket. 12.8% Class “A” vacancy for the North Waterfront / Jackson Square submarket, nearly a 1% decrease quarter-over-quarter. 3rd Quarter, 2009 Vacancy Rate Availability (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q2 '09 Rental Rates1 A 1,670,725 12.8% 11.7% 1.1% 290,404 236,744 53,660 14,448 (35,168) $30.70 B 3,699,610 11.4% 9.5% 1.9% 661,503 543,413 118,090 (24,506) (20,034) $27.00 C 1,470,261 6.0% 5.9% 0.1% 167,415 131,761 35,654 37,838 (60,144) $24.00 6,840,596 10.56% 9.26% 1.30% 1,119,322 911,918 207,404 27,780 (115,346) CLASS “A” HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 12
  15. 15. SAN FRANCISCO OFFICE • THIRD QUARTER VAN NESS/CIVIC CENTER MARKET SUMMARY BY THE NUMBERS 649,563 Square feet of overall vacancy for the Van Ness / Civic Center submarket, a .82% increase quarter-over-quarter. 3,409 Square feet of positive Class “A” absorption in the Van Ness / Civic Center submarket. $29.27 Per Square foot (Full Service) for Class “A” space, a decline of 21.3% year-over-year. 3rd Quarter, 2009 Vacancy Rate Availability (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q2 '09 Rental Rates1 A 2,105,547 3.7% 3.6% 0.1% 454,382 452,814 1,568 3,409 (5,680) $29.27 B 2,759,197 17.0% 14.2% 2.8% 717,942 638,645 79,297 (30,402) (29,631) $25.00 C 1,953,158 5.2% 4.9% 0.3% 118,543 112,543 6,000 (231) (4,018) $23.00 6,817,902 9.53% 8.26% 1.27% 1,290,867 1,204,002 86,865 (27,224) (39,329) CLASS “A” HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 13
  16. 16. SAN FRANCISCO OFFICE • THIRD QUARTER UNION SQUARE MARKET SUMMARY BY THE NUMBERS $30.00 Per Square foot (Full Service) for Class “A” space. 11.45% Overall vacancy for the Union Square submarket, up from 9.4% in the second quarter of 2009. (119,517) Square feet of negative absorption for all classes of space in the Union Square submarket. 3rd Quarter, 2009 Vacancy Rate Availability (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q2 '09 Rental Rates1 A 181,715 5.2% 3.1% 2.1% 9,428 5,656 3,772 0 (3,772) $30.00 B 3,000,287 8.0% 7.8% 0.3% 361,529 327,058 34,471 (2,761) 3,672 $28.00 C 2,643,155 15.7% 15.4% 0.3% 452,627 431,369 21,258 (116,756) (26,724) $24.00 5,825,157 11.45% 11.10% 0.35% 823,584 764,083 59,501 (119,517) (26,824) CLASS “A” HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 14
  17. 17. THIRD QUARTER Lic #00832933
  18. 18. SAN FRANCISCO OFFICE • THIRD QUARTER SOMA MARKET SUMMARY By: Riccardo Gale, Marc Trovato, and Sam Brownell The 3rd Quarter of 2009 in SOMA was a bit desirable available spaces in the market rent expectations and increased sublease and of a dichotomy. Tour and leasing activity was include: direct availabilities are creating attractive strong, but a flood of new availability leasing opportunities for SOMA tenants. resulted in significant negative absorption. 410 Townsend Street – 30,000 RSF Total availability increased from 27% to 31%, of fully furnished brick & timber while average asking rates fell from $27.80 to space divisible to 10,000 RSF $27.69 per Rentable Square Foot per Year 625 Second Street – 32,000 RSF of (RSF). creative brick & timber space divisible to 14,000 RSF The strong negative absorption this quarter was the result Wells Fargo’s exit of 155 5th Investment sales activity continued to move Street, which brought 349,000 of new along at a snails pace. However, speculation availability to market. Were it not for 155 of several, larger scale, potential foreclosures 5th Street, absorption would have been has started to surface. It is expected that Q4 positive for the quarter. 2009 and 2010 will see an up tick in activity, driven by troubled landlords and further Several large tenants touring the market pressure on banks and lenders to mark assets generated considerable buzz this quarter, to current market values. including Zynga for approximately 137,000 RSF (in negotiations at 500 Terry Francois in In conclusion, the SOMA market parameters Mission Bay), Ubisoft for 50,000 RSF, were again negative this quarter, but the rate Twitter for 30,000 RSF (in negotiations at of deterioration continued to slow. Leasing 795 Folsom), and Carat Interactive (in volume was respectable, and tour activity was negotiations for 30,000 RSF at 875 Howard). strong. Landlords of good quality creative Yelp, Pure Digital and FiberTower continue space continued to decrease their rental to tour the market as well. A number of expectations and entertain short-term larger leases were completed this quarter, commitments from the tenant community. including Brown and Toland (renewal), Cisco Landlords were increasingly open to “blend (renewal), and Zynga (expansion). and extend” proposals from tenants hoping to reduce their current rent obligation in exchange for extended lease term. SOMA’s The availability of high-quality creative space investment market continued to stall, as both has increased, with new options available for buyers and sellers were reluctant to make occupancy in 2009. Some of the more deals. Despite the struggling economy, lower OVERALL RENTS VS. VACANCY 2Q ’07 TO 3Q ‘09 15
  19. 19. SAN FRANCISCO OFFICE • THIRD QUARTER SOMA MARKET SUMMARY 3rd Quarter, 2009 Submarket # of Buildings Total Sq. Ft. Available Sq. Ft. Vacancy Rate Average Asking Rent Absorption Sq. Ft. South Beach 19 2,241,187 368,011 16.42% $24.52 1,811 Multimedia Gulch 39 3,999,008 1,031,946 25.81% $26.60 124,015 Yerba Buena / South of Market 19 2,561,807 1,274,742 49.76% $27.97 (410,822) Potrero Hill / Inner Mission 14 1,258,838 387,172 30.76% $23.58 (132,039) Mission Bay 4 588,405 273,272 46.44% $38.50 0 Totals: 95 10,649,245 3,335,143 31.32% $27.69 (417,035) *Rates are based on a weighted average for available space only. SOMA Top Ten Buildings Building 1Rates Direct Sublease Total Avail. Avail. Total Building Stories Sq. Ft. Total Direct Avg. Sq. Ft. Sq. Ft. Sq. Ft. Percent 185 Berry Street 6 939,549 $32.00* 55,097 3,271 58,368 6.2% 475 Brannan Street 4 255,000 $36.00 0 0 0 0.0% 444 DeHaro Street 2 152,000 $28.00 17,288 0 17,288 11.4% 160 King Street 10 167,983 $31.00 6,300 66,086 72,386 43.1% 350 Rhode Island St. South 4 139,509 $29.00 34,841 0 34,841 25.0% 501 2nd Street 7 207,809 $30.00 6,626 32,040 38,666 18.6% 625 2nd Street 4 134,447 $28.00 31,909 16,000 47,909 35.6% 139 Townsend Street 5 57,782 $29.00 32,242 0 32,242 55.8% 410 Townsend Street 4 80,000 $24.00 30,029 0 30,029 37.5% 650 Townsend Street 6 710,400 $23.00 408,333 16,865 425,198 59.9% 1 Rates are Quoted as Full Service Largest Continuous Spaces Address Square Feet Available 370 3rd Street 365,584 155 5th Street 349,286 650 Townsend Street 313,376 500 Terry Francois Blvd. 268,245 875 Howard Street 190,000 185 Berry Street 175,000 160 King Street 56,963 16
  20. 20. SAN FRANCISCO OFFICE • THIRD QUARTER SOMA MARKET SUMMARY Top Leases Tenant Lessor Square Feet Address Brown and Toland ( R) American Assets 51,871 160 King Street CISCO ( E ) Rreef 37,000 185 Berry Street Zynga Apllo Real Estate Advisors 20,021 444 DeHaro Street Mark Monitor ( R ) ( C ) Kennedy Associates 19,313 303 2nd Street VideoEgg ( R ) The Mariani Trust 17,000 180 Townsend Street Cloudmark ( R ) ( C ) Byer Properties 15,500 128 King Street Outcast Communications ( R ) SFI Real Estate Holdings 14,000 123 Townsend Street EngineYard ( S ) ( C ) Yahoo! 14,465 500 3rd Street Top Pending Leases Tenant Lessor Square Feet Address Zynga CBRE Investrors 137,000 500 Terry Francois Blvd. Twitter ( S ) AOL/Bebo 30,000 795 Folsom Street Carat Interactive TMG Partners 30,000 875 Howard Street StumbleUpon Watson Breevast 20,000 139 Townsend Street Zoom Systems ( S ) Macy's 20,000 22 4th Street JustinTV Watson Breevast 10,000 139 Townsend Street Top Building Sales *No significant SOMA Sale Transactions this Quarter. SOMA Top Picks Location Floor(s) Minimum Size Maximum Size Asking Rent Comments 410 Townsend Street Various 10,000 20,000 $25.00 Fully Furnished Creative Brick & Timber Office Space 575 Florida Street Various 9,000 75,000 $21.00 Creative, High Ceiling Space. Potrero Location. 625 2nd Street Ground 31,909 6,734 $28.00 Creative Brick & Timber. Prime Location. 139 Townsend Street Various 11,000 33,000 $30.00 High Ceiling Brick & Timber Office Space. 3 Full Floors ( S ) = Sublease ( R ) = Renewal ( E ) = Expansion ( C ) = Cornish & Carey Involvement 17
  21. 21. SAN FRANCISCO OFFICE • THIRD QUARTER AGENT ROSTER LEASING INVESTMENTS MARKET RESEARCH Jonathan Allen Bart O’Connor Samuel Brownell El Beh 415.445.5138 415.445.5102 415.445.5113 415.445.5114 jallen@ccarey.com boconnor@ccarey.com sbrownell@ccarey.com ebeh@ccarey.com Karl Baldauf Will Scovill* Kyle Ladewig Ryan Carmichael 415.445.5117 415.445.5134 415.445.5103 415.445.5133 kbaldauf@ccarey.com wscovill@ccarey.com kladewig@ccarey.com rcarmichael@ccarey.com John Cashin Nick Slonek Rita Meehan 415.445.5112 415.445.5100 415.445.5135 jcashin@ccarey.com nslonek@ccarey.com rmeehan@ccarey.com Donnette Clarens Marc Trovato 415.445.5120 415.445.5118 dclarens@ccarey.com mtrovato@ccarey.com Kevin Delehanty INDUSTRIAL LEASING C&C CAPITAL OFFICE ADMIN. 415.445.5132 kdelehanty@ccarey.com Bruce Carter Matthew Gum BK Masterson 415.445.5142 415.445.5116 415.445.5150 Shannon Dolan bcarter@ccarey.com mgum@ccareycapital.com bmasterson@ccarey.com 415.445.5105 sdolan@ccarey.com Brad Zampa RETAIL LEASING 415.445.5115 Riccardo Gale bzampa@ccareycapital.com 415.445.5119 Tracy Chiao rgale@ccarey.com 415.445.5140 Raquel Ledesma tchiao@ccarey.com 415.445.5136 Erika Elliott rledesma@ccarey.com 415.445.5124 Jim Lucas eeliott@ccarey.com 415.445.5106 Marissa Miller jlucas@ccarey.com 415.445.5139 Melinda Miyagishima mmiller@ccarey.com 415.445.5108 Tom Neuburger mmiyagishima@ccarey.com 415.445.5129 Todd Motoyoshi tneuburger@ccarey.com 415.445.5122 Rachel Pagan tmotoyoshi@ccarey.com 415.445.5121 John Norton rpagan@ccarey.com 415.445.5137 Julie Taylor jnorton@ccarey.com 415.445.5128 jtaylor@ccarey.com * Indicates Life Science Specialist 18
  22. 22. SAN FRANCISCO OFFICE • THIRD QUARTER 19

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