San Francisco Office Subleases Soar, Rents Predicted to Drop

San Francisco has over 4.5 million square feet of available office space for sublease, and some brokers are predicting that this may cause direct office space rents to drop by as much as 10-20%. The Covid-19 is not the only reason for this spike in available space. There were a number of new office projects under construction and some firms taking new space may have had remaining leasehold terms to put on the market. San Francisco has gotten expensive, and with a slew of new business taxes on the County Supervisors radar, firms are expanding or relocating outside of California. Many companies have their employees working from home, and some have made this permanent. “Pandemic-related or not, San Francisco now has the highest sublease availability rate in the country, significantly outpacing the second-place San Jose, according to Jesse Gundersheim, director of market analytics for Costar Group. “Offices listed at an approximate 12% discount to space that is available directly from a landlord. Businesses now face unprecedented challenges that could curtail demand and lead landlords to lower rents significantly for the first time in over a decade.’”