Fourth Quarter • San Francisco • Office Report
                SAN FRANCISCO OFFICE
                      Lic #00832933
  ...
SAN FRANCISCO OFFICE • FOURTH QUARTER




TABLE OF CONTENTS

Coverage Map                                                 ...
SAN FRANCISCO OFFICE • FOURTH QUARTER




COVERAGE MAP




                                                       1
SAN FRANCISCO OFFICE • FOURTH QUARTER




OFFICE UPDATE AND Q4 2009 IN REVIEW

By: Ryan Carmichael, Financial Analyst / Ma...
SAN FRANCISCO OFFICE • FOURTH QUARTER




    OFFICE MARKET HIGHLIGHTS - LEASING

                                        ...
SAN FRANCISCO OFFICE • FOURTH QUARTER




OFFICE MARKET HIGHLIGHTS - LEASING

         Levi’s Plaza (1155 Battery Street) ...
SAN FRANCISCO OFFICE • FOURTH QUARTER




OFFICE MARKET HIGHLIGHTS- SALES

                           BY THE NUMBERS      ...
SAN FRANCISCO OFFICE • FOURTH QUARTER




C&C FOCUS – TIER 1, 2 & 3




    Energy Star   LEED – Certified   LEED - Pendin...
SAN FRANCISCO OFFICE • FOURTH QUARTER




C&C FOCUS – TIER 1, 2 & 3




    Energy Star   LEED – Certified   LEED - Pendin...
SAN FRANCISCO OFFICE • FOURTH QUARTER




NORTH FINANCIAL DISTRICT MARKET SUMMARY

4th Quarter, 2009
                     ...
SAN FRANCISCO OFFICE • FOURTH QUARTER




NORTH FINANCIAL DISTRICT MARKET SUMMARY

               BY THE NUMBERS


      ±...
SAN FRANCISCO OFFICE • FOURTH QUARTER




SOUTH FINANCIAL DISTRICT MARKET SUMMARY

4th Quarter, 2009
                     ...
SAN FRANCISCO OFFICE • FOURTH QUARTER




SOUTH FINANCIAL DISTRICT MARKET SUMMARY

               BY THE NUMBERS


      ±...
SAN FRANCISCO OFFICE • FOURTH QUARTER




NORTH WATERFRONT/JACKSON SQUARE MARKET SUMMARY

                         BY THE ...
SAN FRANCISCO OFFICE • FOURTH QUARTER




VAN NESS/CIVIC CENTER MARKET SUMMARY

                             BY THE NUMBER...
SAN FRANCISCO OFFICE • FOURTH QUARTER




UNION SQUARE MARKET SUMMARY

                            BY THE NUMBERS


      ...
FOURTH QUARTER




     Lic #00832933
SAN FRANCISCO OFFICE • FOURTH QUARTER




SOMA MARKET SUMMARY

By: Riccardo Gale and Marc Trovato

The SOMA office leasing...
SAN FRANCISCO OFFICE • FOURTH QUARTER




SOMA MARKET SUMMARY

4th Quarter, 2009
Submarket                                ...
SAN FRANCISCO OFFICE • FOURTH QUARTER




SOMA MARKET SUMMARY

Top Leases

Tenant                                         ...
SAN FRANCISCO OFFICE • FOURTH QUARTER




AGENT ROSTER

LEASING                                                       INVE...
SAN FRANCISCO OFFICE • FOURTH QUARTER




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San Francisco Office Market Report Q4, 2009

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In depth analysis of the San Francisco office market in Q4, 2009

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San Francisco Office Market Report Q4, 2009

  1. 1. Fourth 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 • FOURTH 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 • FOURTH QUARTER COVERAGE MAP 1
  4. 4. SAN FRANCISCO OFFICE • FOURTH QUARTER OFFICE UPDATE AND Q4 2009 IN REVIEW By: Ryan Carmichael, Financial Analyst / Market Research Coordinator The cautious expectations with which the the form of space upgrades, including Del quality”, view-space in San Francisco’s CBD San Francisco office market began 2009 Monte committing to space at One has experienced increased occupancy rates. were validated at year’s end by increased Maritime, moving from The Landmark As this trend continues into 2010 we vacancy, decreased rental rates and Building at One Market, Medivation moving expect asking rates in this segment of the depressed property values; leaving from 201 California Street into Hills Plaza, market to firm up. Furthermore, should everyone to wonder, “Where is the as well as Silicon Valley Bank and AT liquidity increase in 2010, near term bottom and when will it appear?” The Kearny, both of which have committed to defaults, foreclosures, and work-outs will largest financial melt down since the Great space at Tishman Speyer’s 555 Mission bring new opportunity for equity which has Depression took its toll on the San Street. been patiently waiting on the sidelines, Francisco office market, causing business spurring a re-growth for the San Francisco conditions to deteriorate across all Citywide, the amount of available sublease office market. industry sectors. Weakened professional space (currently just over 2.1 million services and declining consumer spending square feet) has decreased to its lowest elevated San Francisco’s unemployment point of 2009. The accumulation of rate to 10.2 percent in August (its highest available sublease space which started in point in 2009), however since then the beginning of 2009, has been eroded by unemployment has receded to 9.7 percent companies capitalizing on economical (as of November), hinting at economic downtown office space. Law firm Novak, stabilization. Druce, Quigg LLP took advantage of the heavily discounted sublease space in the After seeing slight blip of positive CBD when it subleased Sequoia Capital’s absorption in the third quarter, the San top-floor space at Tishman Speyer’s 555 Francisco office market - continuing the Mission Street. The decline in sublease trend of 2009 – pulled back and recorded space has been in part due to tenants 366,965 square feet of negative net focusing on shorter term leases as well. absorption in the final quarter. This pushed the overall citywide vacancy rate to 14.8 Total leasing velocity picked up over the percent from Q3’s mark of 14.4 percent, second half of the year, however San recording yet another vacancy high-water Francisco recorded a modest 4.1 million mark since the dotcom crash nearly a square feet of gross leasing activity in 2009 decade ago. The California State - compared to 4.4 million square feet and Automobile Association (CSAA) was the 7.1 million square feet in 2008 and 2007 largest contributor to the negative respectively. The drop in activity is due to absorption in the fourth quarter when it economic recession, which has forced moved the last of its employees to its new companies of all sizes revisit occupancy campus in the East Bay. This was not a needs, resulting in downsizing or surprise to the market as it was in the plan dissolution. As vacancy continues to rise, disclosed over two years ago. However tenant retention has become priority there are limited requirements over number one for landlords. Helping tenants 100,000 square feet in the Civic Center adjust to a struggling economy by taking submarket, which suggest that the high 17.6 space back – but maintaining occupancy percent vacancy rate may be an issue for levels, is par for the course for today’s this, and other tertiary market, for a while. building ownership. Levi’s Strauss & Co. was able to renew its lease of 354,797 Asking rents for class A trophy buildings, square feet at 1155 Battery Street as well nearly $85 per square foot gross in late as decrease its overall footprint by 181,469 2007, were approximately $50 per square square feet. foot gross on average at the end of 2009. This tranche of the market, however, has With tenant demand waning and existing benefited from the traditional “flight to companies seeking to shed excess space, quality”, as tenants upgrade to better view- the San Francisco office market will space. The CBD market has kept vacancy continue to limp through the recession. rates in check at 12.3 percent. Many of the Company downsizing will elevate vacancy largest lease transactions of 2009 came in suppressing rental rates. Due to a “flight to 2
  5. 5. SAN FRANCISCO OFFICE • FOURTH QUARTER OFFICE MARKET HIGHLIGHTS - LEASING Average Asking Rate 1 2009 2009 Submarket Net Rentable Area * Vacancy Total Vacancy 3 Total Availability Class A Class B Class C Q4 Net Absorption 2 Y-T-D North Financial District 28,691,601 4,127,644 14.39% 19.50% $35.40 $28.00 $23.00 (10,742) (602,556) South Financial District 24,749,615 2,471,753 9.99% 13.66% $35.30 $28.00 $23.00 100,217 (83,039) North Waterfront/Jackson Sq. 6,840,596 710,388 10.38% 16.02% $30.70 $27.00 $24.00 12,037 (195,863) Van Ness/Civic Center 6,817,902 1,205,878 17.69% 18.96% $29.27 $25.00 $23.00 (556,315) (743,647) Union Square 5,974,749 682,098 11.42% 18.05% $30.00 $28.00 $24.00 (15,298) 31,858 SoMa** 10,649,245 3,228,319 30.32% 30.32% $30.30 $27.00 $24.00 106,824 (824,885) San Francisco Office Market 83,723,708 12,426,080 14.84% 18.72% $34.64 $27.26 $23.75 (363,277) (2,418,132) ** 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 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 Q4 48,219,559 5,439,820 962,606 13.3% (227,776) $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 • FOURTH QUARTER OFFICE MARKET HIGHLIGHTS - LEASING Levi’s Plaza (1155 Battery Street) BY THE NUMBERS ±354,797 Square feet Levi’s Strauss renewed at Levi’s Plaza. The transaction is a consolidation from three building to one, reducing the San Francisco retailer’s overall footprint by 181,469 square feet. Significant Leases (By Square Foot) Top Leases for 2009 Tenant Lessor (Sublessor) Address Sq. Ft. Levi Strauss & Co. ( R ) Levi Strauss Associates 1155 Battery Street 354,797 Morgan Lewis ( R ) Morgan Stanley 1 Market Plaza (Spear Tower) 153,000 Del Monte Foods Morgan Stanley 1 Maritime Plaza 152,917 Reed Smith LLP Hines 101 Second Street 109,994 Medivation Morgan Stanley (PPF) 345 Spear Street 63,970 Credit Suisse ( R ) AEW Capital Management 650 California Street 62,139 Brown & Toland ( R ) American Assets, Inc. 153 Townsend Street 51,871 Ropes & Gray ( R ) Boston Properties 3 Embarcadero Center 50,000 Duane Morris ( R ) Paramount/ Morgan Stanley 1 Market Plaza (Spear Tower) 49,847 Cooper, White & Cooper LLP ( R ) Glenborough Realty Trust Inc. 201 California Street 44,202 Top Leases for Q4 2009 Tenant Lessor (Sublessor) Address Sq. Ft. Levi Strauss & Co. ( R ) Levi Strauss Associates 1155 Battery Street 354,797 Del Monte Foods Morgan Stanley 1 Maritime Plaza 152,917 Medivation Morgan Stanley (PPF) 345 Spear Street 63,970 Credit Suisse ( R ) AEW Capital Management 650 California Street 62,139 Ropes & Gray ( R ) Boston Properties 3 Embarcadero Center 50,000 Cooper, White & Cooper LLP ( R ) Glenborough Realty Trust Inc. 201 California Street 44,202 Foley & Lardner LLP Vornado Realty Trust 555 California Street 30, 462 Top Pending Leases Tenant Lessor (Sublessor) Address Sq. Ft. Morrison Foerster ( R ) MetLife, Inc. 425 Market Street 250,000 Zynga CBRE Investors 500 Terry Francois Blvd. 130,000 Exploratorium Port of San Francisco Pier 15 & 17 100,000 Benefits Cosmetics SEB Immobilien 225 Bush Street 53,000 Goldman Sachs ( R ) Vornado Realty Trust 555 California Street 45,000 (S) = Sublease (R)= Renewal (E) = Expansion (C)= Cornish & Carey Involvement 4
  7. 7. SAN FRANCISCO OFFICE • FOURTH QUARTER OFFICE MARKET HIGHLIGHTS- SALES BY THE NUMBERS 550 Terry Francois Blvd. 550 Terry Francois Blvd. was purchased by GLL Real Estate Partners in November of 2009 for $379/s.f. The ±283,000 square foot HQ of the GAP Inc. was one of the few data points for San Francisco’s investment market in 2009. Tishman Speyer purchased the Mission Bay asset in November of 2005 for $171.1 million or $605/s.f. Significant Sale Statistics (By Square Foot) Top Buildings Sales in 2009 (By Square Foot) Building Sq. Ft. Seller Buyer 160 Spear Street 288,308 Legacy Partners Winthrop Realty Trust 550 Terry Francois Blvd 283,000 Tishman Speyer GLL Real Estate Partners 100 Harrison Street 150,000 100 Harrison Street Associates JMA Ventures 120 Howard Street (Note sale) 147,750 Prudential RE Investors Shorenstein Partners 250 Montgomery Street 116,078 Realty Finance Corporation OBO Lincoln Property Co. Argonaut Capital 562-566 Market Street 64,955 Genaro Mendoza Chelsea Pacific Holdings LLC Top Buildings Sales in Q4 2009 (By Square Foot) Building Sq. Ft. Seller Buyer 550 Terry Francois Blvd 283,000 Tishman Speyer GLL Real Estate Partners 120 Howard Street (Note sale) 147,750 Prudential Shorenstein Partners Top Buildings for Sale (Over 50,000 Square Foot) Building Sq. Ft. Seller Buyer 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 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 • FOURTH QUARTER C&C FOCUS – TIER 1, 2 & 3 Energy Star LEED – Certified LEED - Pending 6
  9. 9. SAN FRANCISCO OFFICE • FOURTH QUARTER C&C FOCUS – TIER 1, 2 & 3 Energy Star LEED – Certified LEED - Pending 7
  10. 10. SAN FRANCISCO OFFICE • FOURTH QUARTER NORTH FINANCIAL DISTRICT MARKET SUMMARY 4th Quarter, 2009 Vacancy Rate Availability (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q3 '09 Rental Rates1 A 21,546,720 14.5% 11.3% 3.1% 4,123,258 3,116,924 1,006,334 (8,559) (47,790) $35.40 B 6,288,579 14.9% 14.0% 0.9% 1,373,128 1,261,735 111,393 (6,278) (77,527) $28.00 C 856,302 8.6% 8.4% 0.2% 98,816 91,215 7,601 4,095 739 $23.00 28,691,601 14.39% 11.82% 2.56% 5,595,202 4,469,874 1,125,328 (10,742) (124,578) Historical Trends Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental Rates 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 Q4 21,546,720 2,437,999 677,910 14.5% (8,559) $35.40 HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 8
  11. 11. SAN FRANCISCO OFFICE • FOURTH QUARTER NORTH FINANCIAL DISTRICT MARKET SUMMARY BY THE NUMBERS ±(602,556) Square feet of negative net absorption in the North Financial District. ±152,917 Square feet committed to by Del Monte at One Maritime Plaza. The company will move in April of 2011 and will occupy 7 floors. At $35.40 Class “A” asking rates are beginning to firm up. CLASS “A” HISTORICAL DIRECT VS. SUBLEASE VACANT SPACE 9
  12. 12. SAN FRANCISCO OFFICE • FOURTH QUARTER SOUTH FINANCIAL DISTRICT MARKET SUMMARY 4th Quarter, 2009 Vacancy Rate Availability (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q3 '09 Rental Rates1 A 20,181,060 10.7% 9.7% 1.0% 2,828,249 2,471,487 356,762 80,375 145,018 $35.30 B 3,346,323 5.7% 5.4% 0.3% 401,558 390,489 11,069 16,278 29,810 $28.00 C 1,222,232 10.0% 10.0% 0.0% 151,162 144,964 6,198 3,564 (25,885) $23.00 24,749,615 9.99% 9.18% 0.81% 3,380,969 3,006,940 374,029 100,217 148,943 Historical Trends Class A Quarter Total RSF Direct Vacant Sublet Vacant Vacancy Absorption Rental Rates 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 Q4 20,181,060 1,966,796 191,732 10.7% 80,375 $35.30 HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 10
  13. 13. SAN FRANCISCO OFFICE • FOURTH QUARTER SOUTH FINANCIAL DISTRICT MARKET SUMMARY BY THE NUMBERS ±28,730 Square feet was sublet to Babcock & Brown Aircraft Management from Oracle at 525 Market Street. 100,217 Square feet of positive net absorption for all building classes represents the second consecutive quarter of positive absorption in the South Financial District. 9.9% overall vacancy rate in Q4 (includes sublease space and all building classes), a decline from Q3’s mark of 11.1%. CLASS “A” HISTORICAL DIRECT VS. SUBLEASE VACANT SPACE 11
  14. 14. SAN FRANCISCO OFFICE • FOURTH QUARTER NORTH WATERFRONT/JACKSON SQUARE MARKET SUMMARY BY THE NUMBERS +62,584 Square feet lease was renewed by NorCal Insurance, Inc., at 560 Davis Street. 6,649 Square feet of positive net absorption for all building classes in the North Waterfront / Jackson Square submarket. 14.7% Class “A” vacancy for the North Waterfront / Jackson Square submarket, an increase from Q3’s mark of 12.8%. 4th Quarter, 2009 Vacancy Rate Availability (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q3 '09 Rental Rates1 A 1,670,725 14.7% 13.6% 1.1% 302,097 251,970 50,127 (32,365) 14,448 $30.70 B 3,699,610 10.3% 9.7% 0.6% 634,188 577,911 56,277 40,002 (24,506) $27.00 C 1,470,261 5.7% 5.7% 0.0% 159,826 125,349 34,477 (988) 37,838 $24.00 6,840,596 10.38% 9.77% 0.62% 1,096,111 955,230 140,881 6,649 27,780 CLASS “A” HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 12
  15. 15. SAN FRANCISCO OFFICE • FOURTH QUARTER VAN NESS/CIVIC CENTER MARKET SUMMARY BY THE NUMBERS +584,48 Square feet was vacated by th California State Automobile Association (CSAA) when it moved its headquarters to the East Bay in Q4. 21.1% Class “A” vacancy in the Van Ness/ Civic Center submarket, represnting a year-over-year increase of 18.5% $29.27 Per Square foot (Full Service) for Class “A” space, a decline of 19.81% from the end of 2008. 4th Quarter, 2009 Vacancy Rate Availability (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q3 '09 Rental Rates1 A 2,105,547 21.1% 21.1% 0.0% 459,287 459,287 0 (366,901) 3,409 $29.27 B 2,759,197 25.0% 22.2% 2.8% 767,194 687,897 79,297 (220,034) (30,402) $25.00 C 1,953,158 3.6% 3.6% 0.0% 66,043 60,043 6,000 30,620 (231) $23.00 6,817,902 17.69% 16.54% 1.15% 1,292,524 1,207,227 85,297 (556,315) (27,224) CLASS “A” HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 13
  16. 16. SAN FRANCISCO OFFICE • FOURTH QUARTER UNION SQUARE MARKET SUMMARY BY THE NUMBERS $30.00 Per Square foot (Full Service) for Class “A” space. 11.71% Overall vacancy for the Union Square submarket, up from 11.45% in the third quarter of 2009. (13,598) Square feet of negative absorption for all classes of space in the Union Square submarket. 4th Quarter, 2009 Vacancy Rate Availability (SF) Net Absorption Building Class Total RSF Overall Direct Sublet Overall Direct Sublet Current Quarter Q3 '09 Rental Rates1 A 181,715 3.4% 1.3% 2.1% 7,925 2,403 5,522 3,253 0 $30.00 B 3,000,287 8.6% 8.3% 0.3% 391,404 368,391 23,013 (15,995) (2,761) $28.00 C 2,643,155 15.8% 15.7% 0.0% 679,236 670,981 8,255 (856) (116,756) $24.00 5,825,157 11.71% 11.47% 0.24% 1,078,565 1,041,775 36,790 (13,598) (119,517) CLASS “A” HISTORICAL VACANCY VS. LEASE RATES 1 Rates are Quoted as Full Service 14
  17. 17. FOURTH QUARTER Lic #00832933
  18. 18. SAN FRANCISCO OFFICE • FOURTH QUARTER SOMA MARKET SUMMARY By: Riccardo Gale and Marc Trovato The SOMA office leasing market reacted as available for occupancy in 2010. Some of the reluctant to make deals. The SOMA expected to the macroeconomic woes of more desirable available spaces in the market market remains attractive to tenants 2009, with vacancy increasing 38% and include: due to the location and high quality average asking rents falling 16% over the 625 Second Street – 32,000 RSF of creative space options. Reduced course of the year. However, the year creative brick & timber space divisible demand continues to push rents down, finished on a positive note, with the 4th to 14,000 RSF presenting excellent opportunities for quarter showing absorption of 108,824 RSF 475 Brannan Street – Up to 80,000 RSF tenants in the market. (Rentable Square Feet) of positive net of creative, high end brick and timber absorption, marking the first quarter of space on two interconnected floors positive absorption since Q1 2008. Rents 139 Townsend – 33,000 RSF of creative held firm in the fourth quarter and appear to brick & timber space over 3 contiguous have settled into the $27/RSF range. floors Fueling the positive absorption this quarter Investment sales activity remained sluggish. A were Carat Interactive and Heald College, speculative ballpark development at 72 Townsend who combined for approximately 75,000 RSF Street was foreclosed upon, as the ownership at 875 Howard Street, and Twitter, who failed to procure a tenant. Subsequent leased 60,000 RF at 795 Folsom. Additional foreclosures will likely result in increased positive absorption was the result of many investments activity in 2010, driven by over smaller leased signed during the quarter. leveraged landlords pressed by banks and lenders looking to revalue current assets. Larger tenants actively touring the market this quarter included Zynga for In conclusion, asking rates again fell slightly, but approximately 125,000 RSF (continuing to absorption was positive. Leasing volume was on grow at 444 DeHaro), and Ubisoft for par with the previous quarter, and tenant touring 50,000 RSF (in negotiations at 625 3rd activity remains fairly positive. Landlords of good Street). The EPA remains in search of quality brick and timber space continue to approximately 350,000 RSF for its new demand a premium over commodity space, and headquarters office, which could land them remain focused on shorter lease terms. Landlords at 370 3rd Street and bring that development are increasingly open to “blend and extend” to 100% occupancy. proposals from credit tenants hoping to reduce their current rent obligation in exchange for The availability of high-quality creative space extended lease term. SOMA’s investment market has increased slightly, with new options continues to stall, as both buyers and sellers are OVERALL RENTS VS. VACANCY 2Q ’07 TO 4Q ‘09 15
  19. 19. SAN FRANCISCO OFFICE • FOURTH QUARTER SOMA MARKET SUMMARY 4th Quarter, 2009 Submarket # of Buildings Total Sq. Ft. Available Sq. Ft. Vacancy Rate Average Asking Rent Absorption Sq. Ft. South Beach 19 2,241,187 317,066 14.15% $24.52 50,945 Multimedia Gulch 39 3,999,008 1,122,984 28.08% $26.60 (91,038) Yerba Buena / South of Market 19 2,561,807 1,138,702 44.45% $27.97 155,546 Potrero Hill / Inner Mission 14 1,258,838 395,801 31.44% $23.54 (8,629) Mission Bay 4 588,405 273,272 46.44% $34.00 0 Totals: 95 10,649,245 3,247,825 30.50% $27.69 106,824 *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* 45,690 3,125 48,815 5.2% 475 Brannan Street 4 255,000 $34.00 80,000 0 80,000 31.4% 444 DeHaro Street 2 152,000 $28.00 16,000 0 16,000 10.5% 160 King Street 10 167,983 $31.00 10,696 66,086 76,782 45.7% 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 10,003 32,040 42,043 20.2% 625 2nd Street 4 134,447 $27.00 31,909 12,410 44,319 33.0% 123 Townsend Street 6 138,735 $29.00 0 0 0 0.0% 139 Townsend Street 5 57,782 $30.00 32,242 0 32,242 55.8% 410 Townsend Street 4 80,000 $24.00 24,000 0 24,000 30.0% 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. 268,245 185 Berry Street 175,000 875 Howard Street 100,000 160 King Street 56,963 16
  20. 20. SAN FRANCISCO OFFICE • FOURTH QUARTER SOMA MARKET SUMMARY Top Leases Tenant Lessor Square Feet Address Twitter AOL/Bebo & Westcore 60,000 795 Folsom Street Heald College TMG Partners 42,581 875 Howard Street Carat Interactive TMG Partners 33,291 875 Howard Street Zoom Systems ( S ) Macy's 20,000 22 4th Street Parsons Brinckerhoff ( E ) Kennedy Associates 11,000 303 2nd Street Top Pending Leases Tenant Lessor Square Feet Address Undisclosed Engineering Firm 642 Harrison Street Ownership Group 12,000 642 Harrison Street Top Building Sales Building Square Feet Seller Buyer 640 Second Street 22,712 Paul J. Hockett 640 Second Street Ventures, LLC ( S ) = Sublease ( R ) = Renewal ( E ) = Expansion ( C ) = Cornish & Carey Involvement 17
  21. 21. SAN FRANCISCO OFFICE • FOURTH 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 415.445.5133 jallen@ccarey.com boconnor@ccarey.com edoyle@ccarey.com rcarmichael@ccarey.com Karl Baldauf Will Scovill* Russ Sherman 415.445.5117 415.445.5134 415.445.5104 Maddy Kieselhorst kbaldauf@ccarey.com wscovill@ccarey.com 415.445.5114 rsherman@ccarey.com 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 Marissa Miller jlucas@ccarey.com 415.445.5139 Melinda Miyagishima mmiller@ccarey.com 415.445.5108 Tom Neuburger mmiyagishima@ccarey.com 415.445.5129 John Norton tneuburger@ccarey.com 415.445.5137 Rachel Pagan jnorton@ccarey.com 415.445.5121 rpagan@ccarey.com Julie Taylor 415.445.5128 jtaylor@ccarey.com * Indicates Life Science Specialist 18
  22. 22. SAN FRANCISCO OFFICE • FOURTH QUARTER 19

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