San Francisco Office Rents Highest in the U.S.
New York may always have Broadway and Times Square, but it can no longer claim to have the nation’s most expensive office rents: San Francisco landlords have won that dubious honor for their city.
Office tenants in San Francisco are paying more than $100 a square foot in annual rent in some downtown buildings, and one lease for $180 a square foot was reported in the suburbs. The top deals in New York also have exceeded $100 a square foot but, on average, annual rents there are lower than in San Francisco, which would have been unheard of five years ago.
Top rents in West Los Angeles have reached $51 per square foot, while downtown L.A.’s high end commands $36 and Orange County gets $43.20, according to CoStar Group Inc., a commercial real estate information service.
Bay Area rents are fueled by booming demand from technology companies and municipal limits on office construction. “We have nowhere to go but up,” said Daniel Cressman, managing director of Grubb & Ellis in San Francisco. “Marquee value is very high here.”
Average annual rent for premium space in San Francisco is $78.29 a square foot, according to CoStar. Rents for similar space in Manhattan are $67 a square foot. Orange County averages $24.66 per square foot, while downtown Los Angeles gets $20.78 and West Los Angeles commands $37.06. Washington, D.C., rolls in at $38.52 a square foot.
“Being expensive isn’t something to be proud of,” said Paul Revson, executive managing director for Julien J. Studley Inc. in New York, which represents commercial real estate tenants. “The cheaper the better, as far as we’re concerned.”
“Cheaper” being a relative term, of course.
Although rents in New York seem to have leveled off, at least for now, San Francisco tenants are bracing for even bigger sticker shock.
In November, voters face two ballot measures that would tinker with a 1986 initiative capping new office development at 950,000 square feet a year. Both measures--one offered by Mayor Willie Brown and the other by slow-growth activists--would place additional constraints on new development. Vacancy rates in San Francisco’s business district are already at 1%, according to a July report by commercial real estate firm Colliers International.
“Just in the last six to 12 months we have been in the same sentence as Hong Kong, London, New York and Tokyo,” said Michael McCarthy, a senior vice president at Colliers International. “But I don’t think there’s a sense of pride. A lot of the brokerage community represents tenants. Everybody would be a lot happier if there were 5 million square feet of vacant space and we were at these rents.”
