TenantSee Weekly: New Year, More Leverage
n March, we’ll hit the 4-year anniversary of the date when offices all over the city first shut down due to the pandemic, a time when just 5% of the city’s office inventory was available. Today, despite having more office workers now than we had then, just under 30m sf of our total supply sits vacant, and even more than that is available. Citywide average asking rental rates declined 17.5% during this period. We expect this trend to continue, possibly to accelerate in 2024. Sublease supply is pulling rates down as companies increasingly view any recovery as a net positive. There’s little on the near-term horizon to suggest we’ve begun (or will even begin in 2024) the long march toward recovery. The market dynamic is considerably worse than that which we experienced in the dot-com recession when it took 63 quarters to get from bottom to peak. We’ve not yet reached the bottom.
TenantSee Weekly: TenantSee Team San Francisco Market Predictions: 2024
Let us lend our TenantSee perspective to the coming year. Despite green shoots from 2 large AI sector leases (Open AI and Anthropic), demand for San Francisco office space remained low throughout 2023, yielding 4 more quarters of negative net absorption. We finished the year with vacancy at >35% - an historical record. The market is under significant stress, creating sizable opportunities for occupiers.
