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. 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.
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. 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. 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. 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
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8. SAN FRANCISCO OFFICE • FOURTH QUARTER
C&C FOCUS – TIER 1, 2 & 3
Energy Star LEED – Certified LEED - Pending
6
9. SAN FRANCISCO OFFICE • FOURTH QUARTER
C&C FOCUS – TIER 1, 2 & 3
Energy Star LEED – Certified LEED - Pending
7
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. 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. 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. 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. 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. 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. 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
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. 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. 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. 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