A surge of leasing activity in the opening months of 2014 set the stage for fourth consecutive year of tightening market dynamics for tenants in San Francisco’s office market. Technology firms including Dropbox, Twitter, Eventbrite, Practice Fusion, and Trulia each signed leases in excess of 100,000 square feet of in the first quarter. Additionally, Salesforce.com has agreed to a 714,000 square foot lease to become the anchor tenant of the iconic Transbay Tower. Transbay Tower, (renamed Salesforce Tower) developer Boston Properties is planning to deliver in 2017 efficient large blocks of space to the market which currently has fewer than 30 contiguous office space availabilities greater than 50,000 square feet.
While high-flying tech firms continued to space-grab for future growth in the first quarter, several traditional business service providers decided to move out of the market due to rapidly rising rental costs. Charles Schwab announced it will be moving 1,000 positions to Texas, Sedgwick will move 100 jobs to Kansas City, and TCHO chocolate will move their operations to Berkeley. With no slowdown in leasing activity heading into 2014, many tenants with impending lease expirations face competitive environments in which office space renewals can cost more than double existing lease agreements. Sticker shock is common and many tenants are adjusting space uses for maximum efficiency amid escalated real estate costs.
Source : DTZ (Groupe UGL)