The two-year economic downturn has provided a sumptuous banquet for companies looking to lease in San Francisco, and perhaps no high-end tenants did better than Goldman Sachs and Morgan Lewis & Bockius.
In January at 555 California St., Goldman Sachs renewed 75,000 square feet on floors 41, 42, and 45 of the BofA building at 555 California St. Goldman paid $55 a square foot for space that would have easily leased in the $80-$90-a-square-foot range in 2007. Meanwhile, a month earlier, law firm Morgan Lewis inked a lease for 150,000 square feet at One Market Plaza, paying about $56 a square foot for spectacular space on floors 25 to 30 and $40 a foot for non-view fifth-floor space.
Both are 10-year commitments, assuring the tenants bargain rates on the best downtown San Francisco has to offer through the next recession and beyond, according to market reports.
... But how soon the renewed bullishness will translate to higher rents for regular commodity space remains unclear. As of May, San Francisco had lost 31,140 office-using jobs from its peak in March 2008. Professional/business services firms have added a few hundred jobs during 2010 but financial firms have continued to cut positions, and local financial sector employment is now at its lowest levels in decades, according to Bureau of Labor statistics compiled by the tenant brokerage group Studley.
The layoffs have left landlords with about 16 million square feet to fill.
“Until we have meaningful job growth and positive absorption in San Francisco for three consecutive quarters, I don’t see why anyone should be raising rents,” said Steve Barker, executive vice president for Studley.
...While Barker said the SoMa is a bright spot for employment growth, the fast-growing tech companies like Twitter and Zynga are “doing everything in their power not to cross Market Street.”
“They are not soaking up the banking space, the financial services space, the law firm space,” said Barker. “They are not absorbing the core vacancies left behind by the professional services industries that occupied that space.” ...
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