Market Insight Editorial & Advice to Tenants: 3Q2012



How many alternative spaces are available to you to suit your requirement? Isn’t this part of the core litmus test of how soft or tight the market really is?

See our chart below where we track the changes for all size ranges of tenants in these reports every quarter. If you want real-time data, please call me.

If you’re in search of intelligent life in the brokerage community, please enjoy this Editorial with my compliments. For more historical perspective, feel free to peruse the last 15 years of my pearls of wisdom.

Dan Mihalovich
President, Mihalovich Partners
Founder, The Space Place®

51.7 Million Square Feet STILL On the Market

The Bay Area supply of space declined 2% from 52.2 million square feet in Q2 to 51.7 million in Q3.

Currently available office space has remained on the market for 2 years or longer! Recall that our markets crashed under the weight of less supply during the Dot Bomb when only 42 million square feet were available for lease.

Q3, 2012 in the San Francisco Bay Area wrapped up as follows:

square feet available (millions) average time on market (months)
San Francisco 14.2 26
San Mateo County 7 21.5
Santa Clara County 14.5 26.7
Contra Costa &
Alameda Counties
16 27

Amount of New Space Added, Past 45 Days

For all you market bulls out there, keep in mind that the activity is dynamic. New space is coming online all the time, both direct and sublease.

Here’s what hit the market in the last 45 days of Q3:

square feet
San Francisco 750,000
San Mateo County 975,000
Santa Clara County 525,000
Contra Costa & Alameda Counties 625,000

Top Five Leasing Transactions by County for 3Q 2012

San Francisco

1 Twitter
1301-1355 Market St
164,051 sq. ft.
2 Hotwire
655 Montgomery St
78,000 sq. ft.
3 New Relic
188 Spear
55,006 sq. ft.
4 United Behavioral Health
425 Market St
53,008 sq. ft.
5 Zurich American Insurance, Co.
525 Market St
49,224 sq. ft.

San Mateo County

1 Storm8 LLC
1000 Bridge Pky
50,305 sq. ft.
2 The Nest
425 Broadway Ave
45,866 sq. ft.
3 -
1900 S Norfolk St
22,318 sq. ft.
4 Checkpoint Software
959 Skyway Rd
21,154 sq. ft.
5 Global English
2000 Sierra Point Pky
19,689 sq. ft.

Santa Clara County

1 Palo Alto Networks, Inc.
4401 Great America Pky
301,185 sq. ft.
2 Amazon
1120 Enterprise Way
224,496 sq. ft.
3 Apple
5300 Stevens Creek Blvd
56,098 sq. ft.
4 Speck Products
303 Bryant St
55,956 sq. ft.
5 Move.com
10 Amalden Blvd
32,405 sq. ft.

Contra Costa &
Alameda Counties

1 -
2100 Powell St
72,083 sq. ft.
2 Singulex, Inc.
1701 Harbor Bay Pkwy
51,858 sq. ft.
3 GT Nexus, Inc.
1111 Broadway
44,425 sq. ft.
4 Federal Emergency Management Agency
1111 Broadway
37,239 sq. ft.
5 -
2727-2731 Systron Dr
26,322 sq. ft.

Vacancy Rates: Are Your Options Fading?

Tenants should watch carefully to detect how and to what extent your field of options changes. Which size blocks of space are getting leased?

Discussing vacancy and absorption rates can be confusing to some. What language makes sense to tenants? Tenants ask, “Tell me about my specific options. How many choices do I have?”

Are your options fading as a result of leasing activity? Review the chart, below, and let’s discuss.

Blocks of Space Available (sq.ft.) San Francisco County San Mateo County Santa Clara County East Bay Counties Total Change in # of Blocks Available
Q3’12 Q2’12 Q3’12 Q2’12 Q3’12 Q2’12 Q3’12 Q2’12 Q3’12 Q2’12
5,000–9,999 311 306 115 122 257 267 386 410 1069 1105
▲ 1% ▼ 6% ▼ 4% ▼ 6% ▼ 3%
10,000–19,999 201 209 61 73 135 146 166 170 563 598
▼ 4% ▼ 16% ▼ 7% ▼ 2% ▼ 6%
20,000–29,999 60 64 27 27 44 48 72 74 203 213
▼ 6% 0 ▼ 8% ▼ 3% ▼ 5%
30,000–39,999 27 27 19 17 17 12 25 17 88 73
0 ▲ 8% ▲ 41% ▲ 47% ▲ 20%
40,000–49,999 13 17 5 6 10 14 16 18 44 55
▼ 24% ▼ 17% ▼ 18% ▼ 11% ▼ 20%
50,000+ 48 49 56 53 134 139 59 61 297 299
▼ 2% ▲ 6% ▼ 4% ▼ 3% 0

You can request a free space survey, containing all direct and sublease space meeting your specific requirements. We can also provide building photographs, floor plans, leasing histories and more. You’ll receive your survey within one business day. To discuss your space needs in person, call 415-434-2820 or email [email protected].

Who Has the Most Incentive to Drive Up Rental Rates In San Francisco?

When we approach a prospective new tenant client, we tell them that we NEVER represent landlords, always avoiding this conflict of interest. So, which of our competitors—leasing firms—do the most landlord representation? Who’s marketing the most space in San Francisco?

Below we’ve surveyed the entire 113 million square foot inventory of San Francisco, and illustrated the Top 25 companies listing the most space on the market. Of the top 7 companies, all are office leasing brokerage firms, controlling 65% of the City’s vacancy!

These brokerage firms are beholden to 400 local landlords, paid to drive up rental rates and drive down concessions for tenants.

Since their allegiance is committed to so many landlords, how can they possibly represent YOUR interests—the tenant’s interests—objectively and aggressively?

The top brokerage companies on the list control more of the City’s vacancy than Tishman Speyer, Shorenstein, Boston Properties and Hines. Surprised, are you not?

% Market Share Square Feet # of Landlords/ Buildings

The % in the chart below refers to the percentage of vacant space under exclusive listing by each company. The accompanying figure is the actual square footage available for lease. We have also noted the number of landlords / buildings represented by each entity.

* Denotes listing brokers. All other companies listed are landlords/developers.

1 *Colliers International 12.5% 2,450,064 99
2 *The CAC Group 12.2% 2,387,827 72
3 *Cornish & Carey Commercial Newmark Knight Frank 10.6% 2,077,978 49
4 *Jones Lang LaSalle 10.4% 2,037,527 49
5 *Cushman & Wakefield, Inc. 7.3% 1,432,420 58
6 *Kidder Mathews 6.3% 1,237,599 45
7 Tishman Speyer 4.4% 854,998 5
8 *CBRE 4.2% 830,424 26
9 Shorenstein Properties, LLC 3.7% 731,146 7
10 *Cassidy Turley 1.8% 357,521 31
11 Beacon Capital Partners, LLC 1.6% 307,000 1
12 Hines 1.0% 203,722 5
13 *TRI Commercial / CORFAC International 1.0% 201,096 54
14 Boston Properties Limited Partnership 0.9% 182,999 4
15 Kilroy Realty Corporation 0.9% 180,000 2
16 Flynn Holdings 0.9% 179,709 2
17 *Colton Commercial & Partners 0.7% 143,353 22
18 *Avison Young 0.6% 122,460 5
19 The Presidio Trust 0.6% 111,076 45
20 *Starboard TCN Worldwide Real Estate 0.5% 103,713 39
21 *Sansome Street Advisors, Inc. 0.5% 100,926 12
22 *Terranomics Retail Services 0.5% 98,403
23 The Carlyle Group 0.4% 82,134
24 GateCapital Properties LLC 0.4% 80,694
25 Pacific Eagle Holdings Corporation 0.4% 76,375
  Total   19,560,890  

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