Visualizing All the Vacant Office Space in San Francisco
source link: https://socketsite.com/archives/2021/07/visualizing-all-the-vacant-office-space-in-san-francisco-2.html
Go to the source link to view the article. You can view the picture content, updated content and better typesetting reading experience. If the link is broken, please click the button below to view the snapshot at that time.
Comments from Plugged-In Readers
This begs the question – what to do with all that empty office space. The average annual net absorption for the boom decade just ended was what? About 1.5 million feet? It would take 11 years at that absorption pace to fill the space. However, going forward it’s hard to see SF ever averaging that kind of net absorption again over a prolonged period. So it could take decades to fill the 17 million feet of empty space.
This does not bode well for the owners of these buildings – generally. Some of the space can be converted to life sciences or residential. But most of it cannot. Already the Oceanwide development has been abandoned as has 88 Bluxome – and the to follow second phase.
Mission Rock is going forward but it had already started construction and it was early enough to tweak the design and make that space aimed towards life-science tenants. Dropbox abandoned its SF headquarters but that building(s) had been designed to accommodate life science space and a small potion of DropBox’s sublease was picked up by a life science company. Life science may be the only option for major new SF “office” development Hence the Power Plant project is now planned/designed as life science space.
In terms of the life sciences and biotech SF is at a disadvantage both to SSF/the Peninsula and Berkeley/Emeryville/Oakland – the latter cities are making a big play to attract life science/biotech firms. SF needs to not only clean itself up but change its business tax policy if it hopes to capture even a small portion of the life science/biotech play.
The only office development that might pan out in SF is small, boutique projects. 50K or so Hence the Union Square condo conversion will include a small amount of said boutique office space.
As to large office developments (like the still empty 3M tower) not only is there not a need/demand for more space, there is no way to determine the potential price/square foot that future space might command. Today it’s $73.24 but how long before landlords losing significant amounts of money on these empty towers make large cuts in the asking price per square foot? Meaning future projects could actually be financially untenable if rents take a big hit.
In the meantime, SF may garner a new moniker – the city of see through towers.
-
Posted by two beers
This is why building booms can be such destructive events in the long-term: they shoehorn land into niches that may be obsolete for future generations. Smaller buildings are more easily repurposed or demolished to make way for new uses, but there’s not a lot of versatility in an office tower.
One easy and always-needed repurposing would be art studios. Most artists just need natural light, ventilation, and access to a utility sink. Thousands of art studios have been destroyed in this latest wave of uncreative destruction; maybe it’s time to bring them back.
-
-
Posted by two beers
Not current “:asking” rent, of course not.
The demand for “creative” office space (no interior walls, but lotsa foosball tables and hot pink Jacobsen chairs) has collapsed now that the need for “work” stations for stylesheet coders of bagel delivery apps has dried up. No one is now going to pay the rent the landlords of those buildings have come to expect.. According to the myth of supply & demand, prices are supposed to drop until takers are found. We all know this is a lie, that there are price floors below which, 1) loan penalties are activated, and 2) current tenants demand rent reductions. The buildings will need to be sold at lower prices, the cap rates of which will allow for lower-cost rentals.
This will take years to play out.
-
-
Posted by Bluntcard
You know this isn’t how city life works. The less desirable, industrial areas of a city are taken advantage of by artists and new entrepreneurs for their lower rents. I remember when Minna was a slum with wonderful art studios. But eventually the gritty areas find new life, ironically art museums, and creative public studios, and then Starbucks moves in, and rents rise and buildings are sold and raised and rebuilt, and artists move on as they always have.
Artists aren’t a part of a city because the city needs them, they are determined to been there and they find a way.
-
Posted by two beers
SOMA and the FiDI are currently, and for the foreseeable future, the least desirable areas of SF…
I guess it’s better – from capitalism’s POV – to just let the see-through buildings rot and deteriorate.
-
Posted by Bluntcard
Now you’re just sounding emotional and unreasonable. FIDI which literally stands for FINANCIAL DISTRICT is the heart of capitalism, what are you expecting to happen there? This city was build by banks. If a city like San Francisco with all of its juxtapositions doesn’t thrill and inspire you, then you shouldn’t be living in a city. You should be living in an artist’s community in the desert. My guess is you are not an artist.
-
-
-
Posted by Archie
I agree so much art culture has been lost can a city funded program start the Art .
-
Posted by Brian M
Ah yes. The standard answer of the modern educated left. We have all abandoned religion (thankfully) so we are replacing our priests and temples with “artists”. The modern, craft-free, politically-correct content narcissistic new “religion”. Well, there are plenty of human feces on the streets of San Francisco that our radical transgressive artists can use for their “paintings” “I call this Brown Study Number Nine”
-
-
Posted by Invented
Why can’t more of the commercial buildings be converted to residential use (as we’re seeing in Wall Street, for ex.). Structural reasons?
-
Posted by AA
Because many of these office buildings have large floor plates not well suited for apartment conversion. Apartments need windows. You end up with really awkward floor plans in many of the units. Not to mention cost of conversion…
-
Posted by Dave (Seattle dude)
Yes. I’m guessing the conversions in NYC are older smaller towers with relatively small floorplates.
-
Posted by Notcom
How can we comment at all – intelligently – when we don’t know which are “these buildings”??
Logic would dictate older/smaller buildings are the least desirable from an office POV, and if,
in fact the vacancies are really in the newer buildings you describe, then they should be becoming the
new class B…and people can move up from those smaller/older buildings into them.
Can class B rents service the debt when someone paid $1500/sf for a building built in 1980 ??
Probably not, but we have a mechanism to deal with that…I believe it’s known as bankruptcy
(and 3c/sf is 3c more than getting nothing)-
Posted by Dave (Seattle dude)
The problem is, of course, that so far landlords are not dropping rents significantly. Even in the sublease market – the old hold and hope game. Of course they can only drop them so far as debt service becomes or would become an issue. Ultimately, given the massive amount of empty space, there probably will be bankruptcies.
-
Posted by Pierson
I value your contribution to this conversation. I hope someone with influential power has similar thoughts as you.
-
-
-
-
Posted by Cave_Dweller
There was never a need for this much office space in SF. It was just artificially hyped up to accommodate QE assisted economic pump during Obama and Trump years.
Even after several $trillion pump post March 2020, the economy hasn’t quite yet recovered — exposing the Fugazi.
Fed is seriously concerned about inflation in housing prices (even if they claim otherwise in popular press) and is currently considering curtailing/stopping MBS purchases as part of the planned taper.
Recommend
About Joyk
Aggregate valuable and interesting links.
Joyk means Joy of geeK