Market Insight Editorial & Advice to Tenants: 4Q2012



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®

49.6 Million Square Feet STILL On the Market

The Bay Area supply of space declined 4.2% from 51.7 million square feet in Q3 to 49.6 million in Q4.

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.

Q4, 2012 in the San Francisco Bay Area wrapped up as follows:

square feet available (millions) average time on market (months)
San Francisco 13.6 26
San Mateo County 7.0 22.7
Santa Clara County 14.5 27.8
Contra Costa &
Alameda Counties
15.6 28.0

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 Q4:

square feet
San Francisco 1,390,000
San Mateo County 270,000
Santa Clara County 1,145,000
Contra Costa & Alameda Counties 775,000

Top Five Leasing Transactions by County for 4Q 2012

San Francisco

1 Salesforce.com
350 Mission St
444,271 sq. ft.
2 Square, Inc.
1455 Market St
250,000 sq. ft.
3 City and County of San Francisco
1155 Market St
110,717 sq. ft.
4 Meraki, Inc.
500 Terry Francois Blvd
109,508 sq. ft.
5 Salesforce.com
50 Fremont
100,000 sq. ft.

San Mateo County

1 OpenWave
1600 Seaport Blvd
36,523 sq. ft.
2 CafePress, Inc.
1850 Gateway Dr
21,441 sq. ft.
3 Kaiser
2001 Junipero Serra
21,374 sq. ft.
4 QlikTech
77 Airport Blvd
18,061 sq. ft.
5 Golub Group
1850 Gateway Dr.
14,088 sq. ft.

Santa Clara County

1 CoreSite Datacenter
2972 Stender Way
50,000 sq. ft.
2 AppSense, Inc.
100 Mathilda Ave.
22,465 sq. ft.
3 Malwarebytes
10 Amalden Blvd
21,924 sq. ft.
4 Nimble Storage
2841 Junction Ave
20,047 sq. ft.
5 Panzura
695 Campbell Technology Pky
16,669 sq. ft.

Contra Costa &
Alameda Counties

1 Clorox, Co.
1221 Broadway
275,501 sq. ft.
2 PG&E
6111 Bollinger Canyon Rd
106,673 sq. ft.
3 -
2999 Oak Rd
40,500 sq. ft.
4 RH USA
455 N Canyons Pky
28,000 sq. ft.
5 Dohmen Safety
2200 Powell
19,087 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
Q4’12 Q3’12 Q4’12 Q3’12 Q4’12 Q3’12 Q4’12 Q3’12 Q4’12 Q3’12
5,000–9,999 305 311 110 115 282 257 360 386 1057 1069
▼ 2% ▼ 4% ▲ 9% ▼ 6% ▼ 1%
10,000–19,999 199 201 62 61 126 135 160 166 547 563
▼ 1% ▲ 1% ▼ 6% ▼ 3% ▼ 3%
20,000–29,999 53 60 26 27 37 44 62 72 178 203
▼ 11% ▼ 3% ▼ 15% ▼ 14% ▼ 12%
30,000–39,999 26 27 13 19 15 17 25 25 79 88
▼ 3% ▼ 31% ▼ 11% 0 ▼ 10%
40,000–49,999 15 13 5 5 11 10 15 16 46 44
▲ 15% 0 ▲ 10% ▼ 6% ▲ 4%
50,000+ 50 48 60 56 141 134 58 59 309 297
▲ 4% ▲ 7% ▲ 5% ▼ 1% ▲ 4%

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 14.1% 2,636,078 108
2 *The CAC Group 10.0% 1,855,412 72
3 *Jones Lang LaSalle 9.5% 1,774,657 51
4 *Cornish & Carey Commercial Newmark Knight Frank 8.5% 1,582,461 53
5 *Cushman & Wakefield, Inc. 7.7% 1,428,230 53
6 *Kidder Mathews 5.1% 958,818 44
7 Tishman Speyer 4.7% 874,532 5
8 *CBRE 4.3% 799,894 25
9 Shorenstein Properties, LLC 3.4% 627,818 7
10 *Cassidy Turley 2.3% 425,509 31
11 SKS Investments 2.2% 404,000 2
12 Beacon Capital Partners, LLC 1.6% 307,000 1
13 Alexandria Real Estate Equities, Inc. 1.2% 215,370
14 Hines 1.1% 211,270 6
15 *TRI Commercial / CORFAC International 1.1% 197,177 55
16 Boston Properties Limited Partnership 1.0% 188,733 4
17 *Avison Young 1.0% 184,156 5
18 Kilroy Realty Corporation 1.0% 180,000
19 Flynn Holdings 0.8% 143,970 2
20 *Sansome Street Advisors, Inc. 0.6% 106,457 14
21 The Presidio Trust 0.5% 96,154 44
22 *Terranomics Retail Services 0.5% 92,283
23 Regus 0.5% 90,000
24 *Starboard TCN Worldwide Real Estate 0.5% 89,564 32
25 The Carlyle Group 0.4% 82,134
  Total   18,645,143  

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