SFCED | San Francisco Center for Economic Development


San Francisco Leads Office Leasing on Tech Strength

It’s slow going in the U.S. office market.

Data released Wednesday shows that vacancy rates in office buildings around the country in the third quarter inched down to an average of 16.9%, from 17%, according to real estate research firm Reis Inc., in a show of how the office sector has proven stubbornly resistant to a quick recovery.

By historic levels, this is still a large amount of vacant space, and shows how employers have been hesitant to expand or plan for future expansion. The rate is close to its post-recession peak of 17.6% reached in 2010, and still well off the boom years-low of 12.5%. The improvements in the office sector have been far slower than in past recoveries of the early 2000s and early 1990s, according to Reis.

The result has been slow rent growth—it’s up 2.3% for the year—something that’s good for tenants but not so great for landlords.

“Unfortunately for the sector, it’s just more of the same,” said Ryan Severino, an economist at Reis.

Of course, there were bright spots in the country, led largely by cities where the tech or energy sectors are strong.

San Francisco saw effective rents—which are rents paid by tenants after incentives and discounts—rise 7.8% over the past 12 months. The city was followed by the San Jose area—which includes Silicon Valley—New York, Houston, and Dallas.

Read more: Wall Street Journal San Francisco Leads Office Leasing on Tech Strength

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San Francisco’s office market saw effective rents rise 7.8% over the past 12 months. Getty Images