SF vacancy sets (the wrong kind of) record

Image by Thomas Barwick

What happens when crime, urban blight, and over-regulation run wild in big CA cities? Businesses leave. SF Examiner reports the grim news from the fair suburb to the north.

The office-vacancy rate in and around downtown San Francisco continued to creep upward to a new record high in the fourth quarter of 2023, according to a report from CBRE.

The increase, though expected, came despite the highest level of leasing activity since the second quarter of 2022 and pushed The City’s core business areas into new territory as the vacancy rate hit 35.6%, up 1.6 percentage points from the prior quarter, the commercial real-estate firm reported.

Meanwhile, the number of office-using workers was down slightly from the previous quarter to 345,200 from 346,500.

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“Looking ahead, the vacancy rate will continue to inch upward but will likely peak in late 2024,” CBRE’s researchers predicted.

San Francisco has been particularly hard-hit, but it is not alone, with cities across the country also harboring expanses of empty office space as employers have shed space and workers have not returned to offices in the same numbers as before the COVID-19 pandemic because of the rise of remote work.

Moody’s Analytics issued a statement Monday saying much of commercial real estate was “stuck in limbo” despite positive signs in the broader economy, and the national office vacancy rate had risen to a record-breaking 19.6%, higher than the 19.3% peaks hit in 1986 and 1991.

San Francisco’s glut of office space is leading building owners to lower rents, with the average asking rate for directly leased space dropping 3.4% in the quarter and 8.7% for the year. That brought the decrease in average asking rate to 21.6% from its peak in early 2020.

Read the whole thing here.

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Related:

• Silicon Valley's (increasingly empty) tech offices stand as ghostly monuments to pre-Covid era

• Viewpoint: SJ's office space vacancy rate soars—as City's budget tightens

• How office vacancies depreciate SJ's real estate while driving up City taxes

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