San Francisco Office Sublease Space Hits 5M SF Mark

The San Francisco office market continued to take hits during the third quarter 2021 with return to work delayed to first quarter 2022, along with labor shortages, exiting companies, etc. But, touring and transaction activities have increased, and VC funding in the technology and life science sectors continues in a positive direction, says Mark McGranahan, principal in the Avison Young San Francisco office.

The class-A office market in San Francisco recorded vacancy decreases to 15 percent and rent increases from $74.32 per square foot to $76.67 per square foot. Landlords have resorted to more free rent and improvement allowances to maintain higher contract rents and increase leasing velocity, according to an Avison Young report.

“The amount of sublease space has decreased by 11 percent from last quarter to 4.9 million square feet which represents 30 percent of the total vacancy,” says McGranahan. “The average duration is 28 months, so that makes it hard to transact as the term is too short for many users. As occupiers return to the office, we believe we will continue to see them reoccupying their space, thus lowering the sublease vacancies.”