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Q1 10 Sf Market Report

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Everything you need to know about the Downtown office market in Q1, 2010.

Everything you need to know about the Downtown office market in Q1, 2010.


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  • 1. First 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. SAN FRANCISCO OFFICE • FIRST 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. SAN FRANCISCO OFFICE • FIRST QUARTER COVERAGE MAP 1
  • 4. SAN FRANCISCO OFFICE • FIRST QUARTER OFFICE UPDATE AND Q1 2010 IN REVIEW By: Ryan Carmichael, Financial Analyst / Market Research Coordinator While market fundamentals still favor tenants, Although the San Francisco economy has Asking rates for high-end view-space in Class the increased leasing velocity has begun to taken positive strides toward recovery, at A towers have increased to the $55.00 - firm-up asking rates in certain segments of the 10.3 percent as of the end of January, San $65.00 per square foot range. One reason market. Sublease space is being removed Francisco’s unemployment reached a new for this is there are very few full floor from the market at an increased rate, and “high-water mark”. Financial services and availabilities in the view-space tranche of top- while this has yet to translate into overall internet related industries have exhibited tier Class A buildings of San Francisco, 24 to positive absorption, it should continue to help improvements in employment growth and be exact. This is a result of the “flight to stabilize all asking rates over the next few output, however overall employment in San quality” which has begun to take shape over quarters. In due time, organic growth from Francisco continues to fall. The key indicators the past several months. While the view- existing tenants and the continued in- are in the construction industry with some space segment of San Francisco’s top-tier migration of new tenants will determine the sub-contractor specialties recording up to 30 buildings is becoming scarce, space in the timing and velocity of San Francisco’s percent unemployment. The overall economy Class A commodity and Class B segments of recovery. remains in limbo as it struggles to transition the market seem to be lingering, resulting in a from recession to recovery phase. widening spread of asking rates. The increased leasing velocity experienced at The declining amount of available sublease the end of 2009 carried over into the first space is another reason why Class A asking quarter of 2010. While true organic growth rates have begun to stabilize. In recent has yet to be seen across all industry sectors, months, four tenants scooped up the heavily many companies have already made critical discounted sublease space at One personnel adjustments and have stopped the Montgomery Tower by committing to nearly proverbial “bleeding”. Industries such as 60,000 square feet of the Charles Schwab social media and technology continue to space. Citywide, the amount of available experience organic growth in San Francisco. sublease space (currently at 1,930,506 square Another bright spot in the first quarter’s feet) has decreased by 11 percent quarter leasing activity came when apparel companies over quarter. Charlotte Russe and Sears/Kmart took 75,000 square feet off the market by leasing space at The first quarter of 2010 was relatively active 575 Florida Street and 760 Market Street, for San Francisco’s investment market. Seller respectively. confidence seems to be returning, as both stabilized assets and assets with near term The San Francisco office market finished the tenant roll have been placed on the chopping first quarter of 2010 with 72,562 of negative block. 211 Main Street which traded for $300 net absorption, incrementally increasing the per square foot and 333 Market Street overall, citywide vacancy rate from 14.84 (currently on the market), both have long percent at the end of 2009 to 15.07 percent term lease commitments from credit tenants. in the first quarter of 2010. Citywide Class A The recent trades (and offerings) may be a asking rates solidified at $34.78 per square sign that the asset value “free fall” has come foot in the first quarter. Market fundamentals to a halt. As the investment market searched will need to exhibit continuous improvement for solid ground in 2010, there were more over the next few quarters before any than a handful of assets which were given measurable rent growth will be achieved. back to lenders. Most notably was Broadway Some landlords have decreased concession Partners’ decision to give back One Sansome packages, specifically the amount of Tenant Street to Prudential Real Estate Improvement dollars given to existing and Investors/Barker Pacific Group, Hines’ play to new tenants; however tenants do not seem to default on 333 Bush Street which opened the be hurt by this, as there has been a door for Los Angeles-based Brookfield Real corresponding drop in Tenant Improvement Estate Finance to take the reigns and Morgan pricing. Rent abatement; however seems to Stanley’s give back of five former Equity Office be holding on as the concession “du jour”. Property buildings to Apollo Real Estate Tenants continue to receive approximately Management (AREA). The large amount of one month of free rent for every year leased, sidelined capital consisting of well capitalized this in turn is keeping contract rental rates hedge funds and foreign investors patiently elevated while providing landlords with waits for more investment opportunities in appropriate rental rate growth over the lease 2010. term. 2
  • 5. SAN FRANCISCO OFFICE • FIRST QUARTER OFFICE MARKET HIGHLIGHTS - LEASING Average Asking Rate 1 2010 2010 Submarket Net Rentable Area * Vacancy Total Vacancy 3 Total Availability Class A Class B Class C Q1 Net Absorption 2 Y-T-D North Financial District 28,596,271 4,107,884 14.37% 18.07% $35.68 $27.21 $23.15 19,760 19,760 South Financial District 24,807,647 2,590,810 10.44% 14.45% $35.30 $30.00 $23.08 (119,057) (119,057) North Waterfront/Jackson Sq. 6,750,054 745,015 11.04% 15.76% $31.01 $26.92 $24.00 (34,627) (34,627) Van Ness/Civic Center 6,774,364 1,190,179 17.57% 19.47% $29.51 $24.19 $23.00 15,699 15,699 Union Square 5,985,211 778,233 13.00% 20.21% $30.54 $27.80 $23.20 (1,895) (1,895) SoMa** 10,649,245 3,180,761 29.87% 29.87% $30.28 $27.64 $24.00 47,558 47,558 San Francisco Office Market 83,562,792 12,592,882 15.07% 18.58% $34.78 $27.41 $23.63 (72,562) (72,562) ** SoMa Inventory includes the following markets: South of the Market; Yerba Buena; Multimedia Gulch; Mission Bay; South Beach; Inner Mission & Potrero Hill Historical Trends Historical San Francisco Office Market Trends Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental Rates 1 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 Q4 48,337,119 5,439,820 962,606 13.3% (227,776) $34.64 2010/Q1 48,337,137 5,809,095 812,902 13.7% (87,475) $34.78 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. SAN FRANCISCO OFFICE • FIRST QUARTER OFFICE MARKET HIGHLIGHTS - LEASING One Montgomery Tower BY THE NUMBERS ±59,139 Square Feet of Charles Schwab sublease space was absorbed by four tenants in recent months at One Montgomery Tower. Significant Leases (By Square Foot) Top Leases for Q1 2010 Tenant Lessor (Sublessor) Address Sq. Ft. WWP ( R ) Multi-Employer Property Trust 303 2nd Street 97,203 California Physicians Services ( R ) ( E ) SEB Immobilien Investment GmbH 225 Bush Street 75,000 Benefit Cosmetics SEB Immobilien Investment GmbH 225 Bush Street 53,000 MarketTools, Inc. ( R ) Principal Real Estate Investors 150 Spear Street 31,123 Quantcast Corp. ( R ) G & G Martco, L.P. 201 3rd Street 26,350 Atom Entertainment SEB Immobilien Investment GmbH 225 Bush Street 25,000 Sears Thor 760M LLC 760 Market Street 24,569 Top Pending Leases Tenant Lessor (Sublessor) Address Sq. Ft. Morrison Foerster ( R ) MetLife, Inc. 425 Market Street 250,000 Latham & Watkins ( R ) RREEF America LLC 505 Montgomery Street 130,000 Ubisoft Capital & Counties USA, Inc. 625 3rd Street 50,000 Goldman Sachs ( R ) Vornado Realty Trust 555 California Street 45,000 Shook, Hardy, & Bacon Brookfield Real Estate 333 Bush Street 35,000 Top 6 Contiguous Spaces (vacant/ available in 12 months) Address Lessor (Sublessor) Sq. Ft. 1355 Market Street (connects w/ 875 Stevenson) The ADCO Group 715,000 150 Hayes St, 100 Van Ness Ave, 150 Van Ness Ave. Patson Group / Vornado Realty Trust 596,574 680 Folsom Street RREEF America LLC 400,000 370 Third Street JER/ Lane Partners 366,287 155 5th Street Continental Development Corp. 349,286 650 Townsend Street TMG Partners 274,563 (S) = Sublease (R)= Renewal (E) = Expansion (C)= Cornish & Carey Involvement 4
  • 7. SAN FRANCISCO OFFICE • FIRST QUARTER OFFICE MARKET HIGHLIGHTS- SALES BY THE NUMBERS 333 Market Street Owners, Principal Global Investors placed 333 Market Street on the chopping block in the first quarter of 2010. The 629,838 square feet South Financial District asset is currently 100% leased to Wells Fargo, which has 16 years left on its lease. Significant Sale Statistics (By Square Foot) Top Buildings Sales in 2010 (By Square Foot) Building Sq. Ft. Seller Buyer 49 Stevenson Street 121,179 Invesco Real Estate Steven Pan 550 Montgomery Street 94,488 Lurie Management, LLC Downtown Properties/Goodwin Gaw Top Buildings for Sale (Over 50,000 Square Foot) Building Sq. Ft. Seller Buyer 303 Second Street 731,962 Kennedy Associates N/A 333 Market Street 629,838 Principal Global Investors N/A Projects Under Construction (By Completion Date) Building Sq. Ft. Owner Location Completion Date Major Tenant 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 Street 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 III 197,000 Wilson Meany Sullivan SFD Approved / Marketing Space ( R ) = Renovation ( E ) = Expansion ( C ) = Cornish & Carey Involvement 5
  • 8. SAN FRANCISCO OFFICE • FIRST QUARTER C&C FOCUS – TIER 1, 2 & 3 Energy Star LEED – Certified LEED - Pending 6
  • 9. SAN FRANCISCO OFFICE • FIRST QUARTER C&C FOCUS – TIER 1, 2 & 3 Energy Star LEED – Certified LEED - Pending 7
  • 10. SAN FRANCISCO OFFICE • FIRST QUARTER NORTH FINANCIAL DISTRICT MARKET SUMMARY 1st Quarter, 2010 Vacancy Rate Vacant (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q4 '09 Rental Rates1 A 21,484,328 14.2% 11.5% 2.8% 3,054,665 2,460,520 594,145 61,244 (8,559) $35.68 B 6,272,073 15.6% 15.0% 0.6% 980,389 940,018 40,371 (42,136) (6,278) $27.21 C 839,870 8.7% 8.7% 0.0% 72,830 72,830 0 652 4,095 $23.15 28,596,271 14.37% 12.15% 2.22% 4,107,884 3,473,368 634,516 19,760 (10,742) Historical Trends Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental Rates 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 Q4 21,546,720 2,437,999 677,910 14.5% (8,559) $35.40 2010/Q1 21,484,328 2,460,520 594,145 14.2% 61,244 $35.68 HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 8
  • 11. SAN FRANCISCO OFFICE • FIRST QUARTER NORTH FINANCIAL DISTRICT MARKET SUMMARY BY THE NUMBERS 19,760 Square feet of positive net absorption for all building classes in the North Financial District. ±75,000 Square feet was converted from sublease to direct by California Physicians Services (Blue Shield of California) at 225 Bush Street. At $35.68 Class “A” asking rates are solidifying. CLASS “A” HISTORICAL DIRECT VS. SUBLEASE VACANT SPACE 9
  • 12. SAN FRANCISCO OFFICE • FIRST QUARTER SOUTH FINANCIAL DISTRICT MARKET SUMMARY 1st Quarter, 2010 Vacancy Rate Vacant (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q4 '09 Rental Rates1 A 20,239,092 11.2% 10.4% 0.8% 2,265,489 2,099,081 166,408 (106,961) 80,375 $35.30 B 3,346,323 4.8% 4.6% 0.3% 162,003 153,234 8,769 28,943 16,278 $30.00 C 1,222,232 13.4% 12.6% 0.8% 163,318 154,133 9,185 (41,039) 3,564 $23.08 24,807,647 10.44% 9.70% 0.74% 2,590,810 2,406,448 184,362 (119,057) 100,217 Historical Trends Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental Rates 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 Q4 20,181,060 1,966,796 191,732 10.7% 80,375 $35.30 2010/Q1 20,239,092 2,099,081 166,408 11.2% (106,961) $35.30 HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 10
  • 13. SAN FRANCISCO OFFICE • FIRST QUARTER SOUTH FINANCIAL DISTRICT MARKET SUMMARY BY THE NUMBERS ±31,123 Square feet was renewed by MarketTools, Inc. at 150 Spear Street. (106,961) Square feet of negative net absorption for Class A space represents the downsizing of a few well known legal and financial services firms in the South Financial District. 10.4% overall vacancy rate in Q1 (includes sublease space and all building classes), an increase from Q4’s mark of 9.9%. CLASS “A” HISTORICAL DIRECT VS. SUBLEASE VACANT SPACE 11
  • 14. SAN FRANCISCO OFFICE • FIRST QUARTER NORTH WATERFRONT/JACKSON SQUARE MARKET SUMMARY BY THE NUMBERS +8,556 Square feet was leased to Sky Holding Company at 551 Pacific Ave. (34,627) Square feet of negative net absorption for all building classes in the North Waterfront / Jackson Square submarket. 12% Class “B” vacancy for the North Waterfront / Jackson Square submarket, an increase from Q4’s mark of 10.3%. 1st Quarter, 2010 Vacancy Rate Vacant (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q4 '09 Rental Rates1 A 1,680,253 14.1% 13.3% 0.8% 236,798 223,497 13,301 8,713 (32,365) $31.01 B 3,599,540 12.0% 10.9% 1.2% 433,311 391,105 42,206 (51,950) 40,002 $26.92 C 1,470,261 5.1% 5.1% 0.0% 74,906 74,906 0 8,610 4,400 $24.00 6,750,054 11.04% 10.21% 0.82% 745,015 689,508 55,507 (34,627) 12,037 CLASS “A” HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 12
  • 15. SAN FRANCISCO OFFICE • FIRST QUARTER VAN NESS/CIVIC CENTER MARKET SUMMARY BY THE NUMBERS +22,000 Square feet was absorbed by multiple tenants at Seligman Western Enterprise’s 1035 Market Street in the Van Ness Submarket this quarter. 16.4% direct vacancy rate for all building classes in the Van Ness/Civic Center submarket, represents a slight improvement from last quarter’s mark of 16.5%. $29.51 Per Square foot (Full Service) for Class “A” space, a decline of 7.35% from the first quarter of 2009. 1st Quarter, 2010 Vacancy Rate Vacant (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q4 '09 Rental Rates1 A 2,105,547 21.4% 21.4% 0.0% 451,421 451,421 0 (6,376) (366,901) $29.51 B 2,720,659 24.4% 21.5% 2.9% 664,087 585,971 78,116 26,052 (220,034) $24.19 C 1,948,158 3.8% 3.8% 0.0% 74,671 74,671 0 (3,977) 30,620 $23.00 6,774,364 17.57% 16.42% 1.15% 1,190,179 1,112,063 78,116 15,699 (556,315) CLASS “A” HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 13
  • 16. SAN FRANCISCO OFFICE • FIRST QUARTER UNION SQUARE MARKET SUMMARY BY THE NUMBERS $30.54 Per Square foot (Full Service) for Class “A” space. 13% Overall vacancy rate for the Union Square submarket, up from 11.71% in the fourth quarter of 2009. (1,895) Square feet of negative absorption for all classes of space in the Union Square submarket. 1st Quarter, 2010 Vacancy Rate Vacant (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q4 '09 Rental Rates1 A 294,125 39.6% 39.0% 0.6% 116,419 114,669 1,750 2,166 3,253 $30.54 B 2,913,987 8.8% 8.5% 0.2% 255,430 248,697 6,733 (14,605) (17,695) $27.80 C 2,777,099 14.6% 14.6% 0.0% 406,384 405,507 877 10,544 (856) $23.20 5,985,211 13.00% 12.85% 0.16% 778,233 768,873 9,360 (1,895) (15,298) CLASS “A” HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 14
  • 17. FIRST QUARTER
  • 18. SAN FRANCISCO OFFICE • FIRST QUARTER SOMA MARKET SUMMARY By: Riccardo Gale and Marc Trovato The first quarter of 2010 saw moderate The availability of high-quality creative space has quality creative space options. Stronger positive absorption in SOMA of 47,558 increased slightly, with new options available for tenant demand from the tech sector has Rentable Square Feet (RSF) paired with a occupancy in 2010. Some of the more desirable resulted in stabilized rents at historically nominal decrease in average asking rents, available spaces in the market include: low levels, presenting excellent down to $27.52/RSF. This marks the second 625 Second Street – 32,000 RSF of opportunities for tenants in the market. of the past three quarters to post positive creative brick & timber space divisible absorption and fairly flat asking rates, to 14,000 RSF suggesting that the SOMA market may 303 Second – 36,000 RSF of creative, indeed be settling into the proverbial high end view space AVERAGE ASKING RATES “market bottom”- assuming the macro 139 Townsend – 33,000 RSF of creative economy continues to show signs of brick & timber space over 3 contiguous Q4 ‘09.........................................$27.52 . stabilization as well. floors Q1 ’10.........................................$27.52 . A review of leases completed this quarter While the leasing market has clearly picked up suggests a “flight to quality”, not surprising steam in recent months, the investments market given current market conditions. 475 remains stagnant, with zero significant trades VACANCY Brannan Street inked three leases totaling during quarter. However, 303 2nd and 208 Utah 60,000 RSF while WPP and Snapfish both are being actively marketed for sale. With a glut Q4 ‘09 .......................................... 30.32% renewed at 303 2nd Street for approximately of capital sitting on the sidelines, these assets are Q1 ’10......................................... .29.87% 130,000 RSF. Retailer Charlotte Russe being carefully monitored by eager investors. leased 52,000 RSF at 575 Florida in Potrero Hill, the SFMTA committed to 23,000 RSF at In conclusion, asking rates again fell slightly, but TOP LEASE 651 Brannan, and Greenberg and Traurig absorption was positive. Leasing volume was subleased 28,000 RSF from DLA Piper at 153 fairly strong, and tenant touring activity remains Townsend. robust. Landlords of good quality brick and WPP timber space continue to demand a premium over 303 2nd Street ...................... 97,203 SF Larger tenants actively touring the market commodity space, and remain focused on shorter this quarter included Zynga for lease terms. Landlords remain open to “blend and approximately 125,000 RSF (continuing to extend” proposals from credit tenants hoping to SUBLEASE SPACE TOP PENDING LEASE grow at 444 DeHaro), and Ubisoft for reduce their current rent obligation in exchange AVAILABLE 50,000 RSF (in negotiations at 625 3rd for extended lease term. SOMA’s investment Street). PRN and UBM are both in the market remains quiet, but is showing some signs Q4 ‘09 .................................. .418,691 SF market for 40,000 RSF. of momentum. The SOMA market remains Q1 ’10...................................306,109 SF attractive to tenants due to the location and high OVERALL RENTS VS. VACANCY Q2 ’07 TO Q1 ‘10 15
  • 19. SAN FRANCISCO OFFICE • FIRST QUARTER SOMA MARKET SUMMARY 1st Quarter, 2010 Submarket # of Buildings Total Sq. Ft. Available Sq. Ft. Vacancy Rate Average Asking Rent Absorption Sq. Ft. South Beach 19 2,241,187 317,066 14.15% $25.56 50,945 Multimedia Gulch 39 3,999,008 1,103,478 27.59% $27.03 (71,532) Yerba Buena/South of Market 19 2,591,710 1,138,702 44.45% $29.17 155,546 Potrero Hill / Inner Mission 13 1,258,838 395,801 31.44% $23.54 (8,629) Mission Bay 5 614,548 273,272 44.47% $38.50 0 Totals: 95 10,705,291 3,228,319 30.16% $29.12 126,330 *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 $33.00* 51,906 3,125 55,031 5.9% 475 Brannan Street 4 255,000 $38.00 13,907 0 13,907 5.5% 444 DeHaro Street 2 152,000 $30.00 0 0 0 0.0% 160 King Street 10 167,983 $33.00 10,696 66,086 76,782 45.7% 350 Rhode Island St. South 4 139,509 $27.00 34,841 0 34,841 25.0% 501 2nd Street 7 207,809 $31.00 9,603 32,040 41,643 20.0% 625 2nd Street 4 134,447 $28.00 31,909 12,410 44,319 33.0% 123 Townsend Street 6 138,735 $31.00 0 13,763 13,763 0.0% 139 Townsend Street 5 57,782 $30.00 37,347 0 37,347 64.6% 410 Townsend Street 4 80,000 $24.00 6,467 0 6,467 8.1% 1 Rates are Quoted as Full Service Largest Continuous Spaces Address Square Feet Available 370 3rd Street 366,287 155 5th Street 349,286 500 Terry Francois Blvd. 280,964 650 Townsend Street 274,563 888 Brannan Street 260,000 499 Illinois - Bldg. 2 210,275 185 Berry Street 175,000 875 Stevenson Street 175,000 875 Howard Street 111,949 16
  • 20. SAN FRANCISCO OFFICE • FIRST QUARTER SOMA MARKET SUMMARY Top Leases Tenant Lessor Square Feet Address WWP ( R ) Multi-Employer Property Trust 97,203 303 2nd Street Greenberg Traurig LLP ( S ) American Assets 28,788 160 King Street Upstream, Inc. ( C ) Prudential/SKS Investments 24,554 475 Brannan Street NGMOCO, Inc. Prudential/SKS Investments 14,818 475 Brannan Street OpenDNS PMI Properties 10,142 410 Townsend Street Top Pending Leases Tenant Lessor Square Feet Address Ubisoft ( R ) Capital & Counties USA, Inc. 50,000 625 3rd Street Top Buildings for Sale Building Square Feet Seller Buyer 303 Second Street 731,962 Kennedy Associates N/A 208 Utah Street 76,679 The Lionstone Group N/A ( S ) = Sublease ( R ) = Renewal ( E ) = Expansion ( C ) = Cornish & Carey Involvement 17
  • 21. SAN FRANCISCO OFFICE • FIRST QUARTER AGENT ROSTER LEASING INVESTMENTS MARKET RESEARCH Jonathan Allen Bart O’Connor Erik Doyle Ryan Carmichael 415.445.5138 415.445.5102 415.445.5111 edoyle@ccarey.com 415.445.5133 jallen@ccarey.com boconnor@ccarey.com rcarmichael@ccarey.com Karl Baldauf Will Scovill* Russ Sherman 415.445.5117 415.445.5134 415.445.5104 Madeline Kieselhorst kbaldauf@ccarey.com wscovill@ccarey.com rsherman@ccarey.com 415.445.5114 mkieselhorst@ccarey.com John Cashin Nick Slonek Kyle Ladewig 415.445.5112 415.445.5100 415.445.5103 jcashin@ccarey.com nslonek@ccarey.com kladewig@ccarey.com Donnette Clarens Marc Trovato Rita Meehan 415.445.5120 415.445.5118 415.445.5135 dclarens@ccarey.com mtrovato@ccarey.com rmeehan@ccarey.com Kevin Delehanty INDUSTRIAL LEASING C&C CAPITAL OFFICE ADMIN. 415.445.5132 kdelehanty@ccarey.com Bruce Carter BK Masterson Brad Zampa 415.445.5142 415.445.5150 Shannon Dolan 415.445.5115 bcarter@ccarey.com bzampa@ccareycapital.com bmasterson@ccarey.com 415.445.5105 sdolan@ccarey.com RETAIL LEASING Riccardo Gale 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 Tom Neuburger jlucas@ccarey.com 415.445.5129 Melinda Miyagishima tneuburger@ccarey.com 415.445.5108 Rachel Pagan mmiyagishima@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