• Office asking rents are at historic highs in San Francisco.
  • Rents, lack of vacancy and employees' housing costs are pushing some firms to the East Bay.
  • Tech firms have pre-leased most of the space at office developments slated to come online.

Similar to San Francisco’s rental and for-sale housing markets, the city’s office sector is being driven by tech industry growth.

“It’s really all about the tech firms. Everyone that has a tech component is looking for space,” said Robert Sammons, regional research director at Cushman & Wakefield, adding tech-related companies account for between 50 percent to 60 percent of all firms leasing space in the city.

The demand for space is such that buildings slated to come online during the first half of 2016 are nearly 100 percent pre-leased, primarily by tech firms.

This active tenant demand points to continued decreases in vacancy and positive absorption, along with historic rent growth, according to a Cushman & Wakefield office report. Citywide, the overall asking rent closed at a record high of $68.14 per-square-foot during the fourth quarter.

These sector positives aside, Sammons notes that San Francisco still has an issue with housing costs and that this issue could cause difficulty in recruiting people further down the road.

Tech companies San Francisco begin to sprawl out

Housing costs have been cited as the main reason for a growing population of high-tech employees heading to the East Bay. This migration, coupled with San Francisco’s historic office rents and limited vacancies, is influencing some companies to follow suit.

Sammons points to several big office parks in Alameda and Contra Costa Counties that are being recreated to better fit and attract tech companies. Rents at these parks will be less than in San Francisco and their relatively close proximity to BART stations will allow tenants to offer their employees shuttles from East Bay stations.

It’s been forecasted that more tech companies like Google may set up shop in Berkeley, as the city is becoming a hub for bio-tech start ups.  However, Berkeley faces a similar housing cost challenge as San Francisco. Midway through 2015 the median home price in the city reached its highest level on record, eclipsing $1 million.

Email Erik Pisor

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