Tech workers and their large salaries have largely been blamed for the gentrification and rising rents plaguing San Francisco. When it comes to finding a place to live, demand has far outpaced supply.
It turns out the same thing is happening to commercial real estate in the city.
According to The Information, back in 2010, there were 22 blocks — or office spaces of 100,000 square feet or more — on the market, and the average rent was $US34.02 per square foot.
Today, rates have risen nearly 90% to reach an average of $US64.45 per square foot for a Class A office space, according to real estate company CBRE. For comparison, at the peak of the dot-com bubble in the third quarter of 2000, rents reached $US67.20 per square foot.
There are currently 7 blocks of office space on the market, significantly fewer than four years ago.
In addition, 3.6 million square feet of office space is under construction, with 65% of those developments already under contract.
“Some of those offices haven’t even been built yet. Some that are still under construction already have ‘pre-leases,’ meaning that a company has put down a deposit and locked down the space. With landlords getting more demanding on lease terms, the financial risk for tenants can be substantial,” Eric P. Newcomer writes in The Information.
Salesforce, Twitter, Dropbox, Adobe, Google, and Square are among the largest tech tenants in the city, each with more than 300,000 square feet of leased space.
Google, Salesforce, LinkedIn, Twitter, Dropbox, and Uber have all signed leases for two million square feet of additional space in the last six months, which will bring in another wave of thousands of new employees.
As Valleywag notes, this highly competitive environment makes it difficult for nonprofits and small startups to find the space to grow their business.
One nonprofit called the In-Home Supportive Services Consortium recently saw its rent rise from $US18 to $US45 per square foot. The team was forced to move into a basement office without windows.
“They are turning our old offices into tech space. I get it — everybody wants to be across the street from the Twitter building,” Deputy Director Mark Burns said to the San Francisco Chronicle. “As much as we hate to be underground, I feel fortunate to be here for the next 10 years.”