Q4 2022 San Francisco Office Occupier's Guide
The San Francisco market continues to favor occupiers. Year-over-year average asking rents dropped from $77.23 per square foot to $74.95 per square foot from Q4 2021 to Q4 2022. Landlords are amenable to increased lease concessions. Total availability builds on previous historic levels, rising from 25.7 percent in Q4 2021 to 31.9 percent in Q4 2022. The total vacancy rate reached 23.6 percent, compared to 18.8 percent one year ago.
Hiring freezes and layoffs were the headlines for companies seeking to control costs amid increasing interest rates and a cooling economy, particularly within the tech sector. Notable companies announcing layoffs in San Francisco include Meta, DoorDash, and Salesforce. Many companies are consolidating locations or right-sizing in the current market. DocuSign reduced its footprint from 150,000 square feet to 93,132 square feet when they renewed at 221 Main Street in December. Reddit’s new 47,872 square foot lease at 303 Second Street will relocate the company from 82,355 square feet at 1455 Market Street.
As employers prepare for a more flexible workforce model, more workers are returning to the office. Space utilization increased from 28.5 percent to 42.5 percent year-over-year, according to Kastle Systems which tracks key card activity. Tenants seeking office space have increased 38 percent year-over-year to 2.9 million square feet. With ample direct and sublease space available in both Class A and B properties, it is an opportune time for occupiers to secure favorable terms.