4Q 2018 Top Leasing Transactions


Tenant Address Sq Ft
Salesforce 550 Howard 325,000
Google One Market Street 309,000
Google One Maritime Plaza 189,000
Door Dash 303 Second 160,000
iRhythm Tech. 650 Townsend 118,000


Tenant Address Sq Ft
Abb Vie Inc. 1000 Gateway, SSF 479,000
Facebook 311 Airport Blvd. 244,000
Facebook 333 Airport Blvd. 215,000
Facebook 322 Airport Blvd. 156,000
Facebook 300 Airport Blvd. 155,000

EAST BAY COUNTIES (Alameda/Contra Costa)

Tenant Address Sq Ft
Square 1955 Broadway, Oakland 380,000
Comcast 3077 Comcast Place, Livermore 74,000
The Cooper Cos. 6101 Bollinger Canyon Rd. San Ramon 52,000
United Bus. Bank 500 Ygnatio Valley Rd. Walnut Creek 40,000
WeWork 2120 Berkeley Way, Berkeley 37,000

The question: Is Winter Coming?

Deep Throat

A guy I respect recently published this article, “Winter is Coming”:

McNellis: Winter is Coming

I replied to him, “There’s a sequel, though….as the same or similar forces which floated RE values since the flames of AIG took hold….have also floated every other kind of asset, like:
Tech companies. The Fed printed nearly $4T between ’08-’15. That’s a shit-ton of fuel. Assuming that Winter is coming, what does it portend for investors/founders/employees of tech companies?

Here’s one answer — from our Deep Throat (unnamed VC):

I largely agree with the article. We are certainly later than early and it reads as sound advice.

I do not know if I agree with you on tech as a whole- much of public tech is very profitable and well capitalized. Tech headcount will shrink during a recession, but I’m not sure it would shrink much more so than employment in the economy more broadly. There are obviously select poster boys for low rate insanity like TSLA, SNAP, DOMO, but I’m not sure you can generalize for the sector as a whole, given strong cash flows and balance sheets at most of the largest tech cos.

Putting valuations aside, other sectors may be fundamentally more egregious, where debt + rates has produced otherwise uneconomical growth and $s are lit on fire buying back stock of secular decliners.

Certainly pockets of venture backed tech are much more fragile than tech broadly, and could hurt SF much more than they could hurt the economy as a whole. As a very rough proxy for better data, California VC $s invested avg $41B/yr from 2014-2017 vs a Bay Area GDP of ~$800B, 5% or so- nothing to sneeze at and hard to quantify further downstream effects or even more localized impacts. The attached excel sheet has a ton of good VC funding data. At some point the venture ecosystem won’t be pretty, I’m not smart enough to say when that will be.

Stock based compensation may become more of an issue if equity prices keep declining, as it will force companies to pay more cash comp and/ or cause effective compensations to decline. Many large tech companies, particularly in internet, report only GAAP earnings, but there will definitely be downstream effects on spending.

At a more macro level I do not really have any new thoughts.. as I have said before I would capitulate if the 10s1s (I think other measures like 10-2 or 5-2 are meaningless) treasury spread inverted and if real M1 growth goes negative. History is an imperfect guide (understatement), but the only good predictors of recession/ extended equity price declines are the 10s1s spread, M1 growth, and risk spreads, followed by y/y unemployment rising.

Of course, markets can go down without recession and/ or this time could be different (historical signals unreliable) given unprecedented dual rate increases + balance sheet reduction. Moreover, risk spreads, price action in banks, RE, energy, etc, + the length of the current cycle do give me some pause.

I attached a couple of notes from an economist I respect and largely agree with, though he is more confident in the Fed’s balancing act abilities than I.

Long way of saying I don’t know, and anyone who says they do is a charlatan. If I had to bet, I would say that this is a correction—repricing for lower growth/ more risk—and we will see yield curve inversion and M1 growth go negative 3-12 months ahead of the real deal. We are using the opportunity to upgrade the quality of our long portfolio, while maintaining low gross and net exposures and not really making any big bets.

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? If you’re a small tenant look alive, because smaller spaces continue to be less available than ever. Call and let’s discuss.

4Q 2018 Office Market Performance

San Francisco, aka Camelot:

  • 9.7 M square feet available (direct + sublease).
  • 1.2 M sf of available space came on the market during the past 30 days.
  • 8% total inventory is available
  • 4.5M sf under construction (will add 4% to total inventory).
  • Market size 121M sf
  • Total Net Absorption, Q4: 1.02M sf.
  • 2018 Net Absorption, 5.1M sf.
  • Total leasing activity at 3.1M sf
    • Subleasing activity at 480k sf = lowest in 4 years
    • Lowest number of transactions in 3 years.

San Mateo County:

  • 5.2 M square feet available (direct + sublease).
  • 9.5% total available
  • 3M sf under construction (will add 6.5% to total inventory).
  • Market size 52M sf
  • Total Net Absorption, Q4: -86,000 sf.
  • 2018 Net Absorption: -53,000 sf.
  • Lowest number of transactions in 9 years

Alameda/Contra Costa Counties:

  • 12.4 M square feet available (direct + sublease)
  • 11% total available
  • 2M sf under construction (will add <2% to total inventory).
  • Market size 111M sf
  • Total Net Absorption, Q4: 159,000 sf
  • 2018 Net Absorption, 785,000 sf
  • Lowest number of transactions in 9 years

After reading through this Market Editorial, please see our collection of educational articles we’ve written for our tenant community.

Five Brokerage Firms Control 8M SqFt of Space Listings in 440 Buildings Listed: How Do You Spell “Conflict of Interest”?

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 78% of the space in San Francisco?

The top companies controlling the most space available are NOT landlords….Rather, they are office leasing brokerage firms acting with the landlord’s interest in mind. They are:

Cushman & Wakefield
Newmark, Cornish & Carey

These brokerage firms control over 78% of all listings and are beholden to more than 440 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?

If Your Lease Will Expire Within The Next Three Years…

Or if there is another compelling reason to discuss your firm’s office leasing situation, please call us. For qualified tenants, we offer the following pre-contract services:

  • Free preliminary office lease and operating expense review;
  • Free consultation to discuss project management, Team formation and project schedule;
  • Market surveys and our specific tenant-driven leasing recommendations ; and
  • Assistance in selection and coordination of all Team members throughout planning and negotiation phases.

Our Clients Love Using GriddigCRE’s First Live Marketplace for Office Leasing Deal-Making

It’s the fastest, most collaborative, fool-proof way to speed through deal-making and get it right the first time. No surprises. No mistakes. The shortest distance to decisions and closed deals.

Try it FREE. Griddig improves the entire industry’s performance. Join Landlords, Tenants, Brokers and Service Providers in the LIVE MARKETPLACE and start your next deal today.

Thank You to Our Clients & Friends

We believe that representing tenants – and only tenants – is a noble cause, our specialty for over thirty years. We greatly appreciate our clients’ confidence and kind words about us, our level of advocacy and enthusiasm to negotiate aggressively ….. and mind the details while guiding the leasing process. Thank you!

505 Montgomery Street, Suite 1100
San Francisco, CA 94111
C: 415-999-9244 
T:  @MihalovichCRE
E: dan@TheSpacePlace.net
W: www.TheSpacePlace.net
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