Wall Street and Markets


Market deflation help freeing up office space in SF

Meanwhile, Apple joins the fun by finally opting to open up an office in SoMa

Innovation series by Ronny Kerr
March 11, 2016
Short URL: http://vator.tv/n/43ee

If 2015 was the year of the unicorn, the unreported story was that it was also the year commercial space sold like hot cakes. So if 2016 is the year of market deflation, what does that bode for office space?

Though office rents grew by 14 percent in 2015 to $72.26 a square foot, surpassing prices in Manhattan, new data from CBRE Group signals demand may have hit a ceiling. The latest data from CBRE shows that there’s now 1.7 million square feet of sublease space available in San Francisco, an increase of 50 percent compared to the 1.1 million square feet that was available in November.

Naturally, the figures are drawing comparisons to the dot-com boom, another time commercial leasing in San Francisco peaked. Still, CBRE hasn’t seen any tenants getting any new discounts, which probably wouldn’t happen unless the trend of opening up space continued.

The trends come at a time where early turmoil in the financial markets had experts warning that a recession could be on the way. More recently, with a few weeks of gains in the markets and oil reaching its floor, those warnings have eased—but only slightly. Even though Double Capital founder Jeffrey Gundlach and iMarketSignals have come out most recently with data opposing the recession narrative, many are still hesitant to be completely positive.

In the technology sector specifically, 36 percent of executives surveyed are expecting a poor business outlook for the year as compared to 2015.

Even so, the financial markets showed the third week in a row of gains, with the Dow Jones Industrial Average up 1.2 percent this week (to 17,213) but still down 1.2 percent for the year and the Nasdaq up 0.7 percent this week (to 4,748) but down 5.2 percent for the year.

Reversing its gains from last week, Twitter tanked 13.2 percent for the week to $16.81, meaning it's down a whopping 27.4 percent for the year. Facebook, which has done pretty well despite market conditions, is up 0.9 percent this week to $109.41 and up 4.5 percent for the year.

Apple dropped a slight 0.7 percent to $102.26 this week, and for the year it’s down 2.9 percent. Alphabet (Google) is up 2.0 percent to $744.87, and for the year it’s down 4.3 percent.

Speaking of tech titans and San Francisco commercial space, Apple has decided to open new offices in the city by the Bay for the first time. The move, which means some employees living in the city won’t need to make the long trek down to Cupertino in Silicon Valley proper, brings Apple up to speed with many of its technology peers who already have space in the city, including Google and Salesforce.

No word yet if Apple’s getting a discount on their new digs.

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