The document summarizes commercial real estate market trends in San Francisco's SOMA neighborhood in the third quarter of 2009. Key points include: - Availability increased to 31.23% in SOMA due to Wells Fargo vacating 349k sf. Net absorption was negative 417k sf. - Asking rents decreased to $30.30 for Class A space and $27 for Class B space. - Leasing activity increased as companies took advantage of low rents, with several large deals signed at 410 Townsend St. - Significant pending deals included Zynga for 137k sf and Twitter for 30k sf, indicating strong potential activity in Q4 2009.

1. PREPARED BY DONNETTE CLARENS AND ELIZABETH HART
415-513-2170 SOMA Office Market
dclarens@ccarey.com -- Lic #01234877
- Submarket Update -- 3rd Quarter, 2009
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ehart@ccarey.com -- Lic #01499002
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Market Statistics SOMA Office Market
Availability Net Absorption Historical Vacancy vs Asking Rates
Total Inventory (sf)
(%) (sf)
SOMA 10,679,148 31.23% (417,035)
SAN FRANCISCO 83,604,019 18.75% (511,631)
Availability
Total Available Class A Asking Class B Asking
(sf) Rents Rents
SOMA 3,335,143 $30.30 $27.00
SAN FRANCISCO 15,675,924 $34.64 $27.26
Leasing Activity Trends
While the above quarterly indicators show continued market softening due to
increased availability and lowered asking rents, tenant tour activity and
transactions increased greatly in Q3 as a result of pent up demand and
increased confidence in business growth going forward. The largest factor in
SOMA’s negative absorption was Wells Fargo vacating 349k sf at 155 5th Street.
Nektar Therapeutics completed the largest lease transaction of the quarter in
San Francisco by leasing over 100k of space in Mission Bay in never occupied
sublease from Pfizer. The remaining top 5 transactions in Soma were existing
tenants renewing and/or expanding. This is largely contributed to companies’
desire to take advantage of low rents, while minimizing any out of pocket
expenses and business disruption that can occur as a result of a change in
location. To the extent that a renewal or direct expansion is available to
tenants and landlords are realistic, this remains a positive way to take
advantage of the soft market.
Deal flow in the 10k plus range increased substantially and several prime SOMA
assets, like 410 Townsend, saw a strong uptick in leasing activity. This quarter
alone 410 Townsend welcomed Yammer/Eventbrite, Playdom and Zendesk as
new tenants and renewed Sony. All deals were in the high teens/low 20s on a
full service equivalent basis. However, even with the combined nearly 40k of
leasing recently completed, there is still an additional 20k of plug & play space
available for lease within the asset.
Tech Transactions across the Bay Area
All eyes are on SOMA at the beginning of Q4 to see if Zynga (pending for 137k at 500
Terry Francois) and Twitter (pending for 30k at 795 Folsom on an off market
AOL/Bebo sublease) will complete their respective transactions. Other companies that
have been shopping the market like Stumble Upon (20k) and JustinTV (10k) are settling
in on locations, leaving many to believe Q4 could result in transaction activity not seen
since before the economic crash in late 2008.
Across the Bay Area, San Mateo saw the completion of two large tech transactions.
Demandtec completed an 82k sublease from Franklin Templeton, while Genentech
appeased fears of further layoffs as a result of the Roche acquisition by completing a 75k
transaction in South San Francisco.
Further down the 101, Ning backfilled 20k of Facebook sublease space in downtown
Palo Alto. Tesla completed the largest Bay Area transaction of the quarter by taking
350,000 sf at Stanford Research Park, fulfilling Stanford’s desire to bring more green
tenants to the area.
SUBMARKET UPDATE

2. PREPARED BY DONNETTE CLARENS AND ELIZABETH HART
415-513-2170 SOMA Office Market
dclarens@ccarey.com Submarket Update -- 3rd Quarter, 2009
-
ehart@ccarey.com
______________________________________________________________________
Significant SOMA Lease Transactions
Tenant Square Feet Type Location
Nektar Therapeutics 102,283 Sublease 455 Mission Bay Blvd
Brown & Toland 51,871 Renewal 160 King Street
Cisco 37,000 Expansion 185 Berry Street
Zynga 20,021 Expansion 444 DeHaro Street
Mark Monitor 19,313 Renewal 303 Second Street
Forecast
Continued rebound in tenant demand and completion of large
transactions. Slowdown in sublease space hitting the market.
However, no rental increases throughout the rest of the year
and a continuance of deals being down in high teens/low $20s
for commodity space and high 20s/low $30s for higher end
creative space. Tenants take advantage of the soft market to
renew early.
Office Vacancy By Subm arket
14.35%
31.23%
10.39%
160 King, San Francisco, Brown & Toland
Brown & Toland, a medical multi-disciplinary independent practice, was the largest
SOMA transaction of the quarter by renewing at 160 King for 7 years in the
mid/high $20s Full Service.
10.56%
11.45% 9.53%
North Financial District South Financial District
North Waterfront/Jackson Sq. Van Ness/Civic Center
Union Square SoMa
185 Berry, San Francisco, Cisco
Cisco expanded their footprint at 185 Berry in the low/mid $30s, as a result of
Cisco’s Pure Digital acquisition. Pure Digital was previously a tenant in Union
Square.
SUBMARKET UPDATE