4 ms·

"San Francisco’s office vacancy rate has risen to 19.7 percent" Wow -- when I was there in the "dot-com boom" of the late '90s and early '00s, such a vacancy r

"San Francisco’s office vacancy rate has risen to 19.7 percent" Wow -- when I was there in the "dot-com boom" of the late '90s and early '00s, such a vacancy rate was unheard of (it was 0.5% for housing, and similar for commercial real estate). Oh well, they've earned this outcome.

jeffbee 5y ago
What's awful is asking rents have barely budged. Peaked at around $85/sf, now around $75/sf. The landlords can afford to just sit on inventory.
- brdd 5y ago
  Totally false. We saw many commercial units between $35-50/sf IG and just signed on one at $37/sf.
  - jeffbee 5y ago
    "At the first quarter of 2021, the overall citywide asking rent was $73.76 per square foot (psf) down 12.0% from the peak of $83.82 psf with the Class A citywide figure at $77.66 psf, down 10.0% from $86.31 psf,. Direct space continues to be marketed at near record levels for the time being with the citywide Class A direct asking rent at $84.47 psf and the CBD Class A direct asking rent at $85.71 psf" — Cushman and Wakefield "Totally false" — Internet rando
    - jedberg 5y ago
      > Cushman and Wakefield Aka a company with a vested interest in convincing you that the $75 price they are offering you is totally in line with the average and it's really good and you should just take it.
      - jeffbee 5y ago
        But an anecdote about a class-C storefront on 7th street is more reliable?
        jedberg 5y ago
        I'd say both are anecdotes with bias, but honestly, the random internet commenter has less incentive to massage the data than WC.
    - htormey 5y ago
      Also, are these figures factoring in things landlords are doing now to sweeten the deal without dropping the per month/sq price? I.e giving months away for free or other incentives like that? Anecdotally I’ve heard office rent is way down as well.
- pradn 5y ago
  Some loans are backed by certain rent levels. So commercial real estate owners don't have as much freedom to reduce their prices as you might think.
- acchow 5y ago
  Commercial leases are often multi-year. If they expect the high vacancy rates to evaporate within a year or two, why would they drop the rates now to fill the vacancy?
- rsync 5y ago
  "What's awful is asking rents have barely budged. Peaked at around $85/sf, now around $75/sf. The landlords can afford to just sit on inventory." This is because their loan-to-value ratio is based on their square foot rental rates. If the unit sits empty they, of course, lose money ... but if they rent it at market price they could lose the property entirely with a (for lack of a better term) margin call. If the value of the building ratchets down and blows up their loan covenants, it is better to have it sit empty and lose money slowly ...
  - fairity 5y ago
    The situation you're describing is lose-lose-lose, which makes me skeptical that it describes what's actually happening. The landlord loses out on rent payments (albeit at a lower monthly rate). The lending institution loses because the default rate increases if landlords stop collecting rent. Renters also lose due to artificially inflated prices. What's stopping the landlord and lender from re-negotiating loan covenants to enable the landlord to collect lower rent payments for a period of time without triggering a new valuation?
redis_mlc 5y ago
You missed out on the "dot bomb" in 2000. There were tunbleweed-like plants blowing around the streets of SOMA, and you could park on the sidewalk and nobody would notice or care. The vacancy rate was probably over 50%, and in some blocks 100%.
ttul 5y ago
At those vacancy rates, the only thing holding up rents is the overwhelming amounts of liquidity in the economic system. Land owners still have cash, in other words. Back in 2001, I rented an office for free. The landlord could then reduce his property tax rate by showing the city that it was occupied at zero rent. Stranger things might happen this time around with 20% vacancy.

jeffbee 5y ago

What's awful is asking rents have barely budged. Peaked at around $85/sf, now around $75/sf. The landlords can afford to just sit on inventory.

brdd 5y ago
Totally false. We saw many commercial units between $35-50/sf IG and just signed on one at $37/sf.
- jeffbee 5y ago
  "At the first quarter of 2021, the overall citywide asking rent was $73.76 per square foot (psf) down 12.0% from the peak of $83.82 psf with the Class A citywide figure at $77.66 psf, down 10.0% from $86.31 psf,. Direct space continues to be marketed at near record levels for the time being with the citywide Class A direct asking rent at $84.47 psf and the CBD Class A direct asking rent at $85.71 psf" — Cushman and Wakefield "Totally false" — Internet rando
  - jedberg 5y ago
    > Cushman and Wakefield Aka a company with a vested interest in convincing you that the $75 price they are offering you is totally in line with the average and it's really good and you should just take it.
    - jeffbee 5y ago
      But an anecdote about a class-C storefront on 7th street is more reliable?
      - jedberg 5y ago
        I'd say both are anecdotes with bias, but honestly, the random internet commenter has less incentive to massage the data than WC.
  - htormey 5y ago
    Also, are these figures factoring in things landlords are doing now to sweeten the deal without dropping the per month/sq price? I.e giving months away for free or other incentives like that? Anecdotally I’ve heard office rent is way down as well.
pradn 5y ago
Some loans are backed by certain rent levels. So commercial real estate owners don't have as much freedom to reduce their prices as you might think.
acchow 5y ago
Commercial leases are often multi-year. If they expect the high vacancy rates to evaporate within a year or two, why would they drop the rates now to fill the vacancy?
rsync 5y ago
"What's awful is asking rents have barely budged. Peaked at around $85/sf, now around $75/sf. The landlords can afford to just sit on inventory." This is because their loan-to-value ratio is based on their square foot rental rates. If the unit sits empty they, of course, lose money ... but if they rent it at market price they could lose the property entirely with a (for lack of a better term) margin call. If the value of the building ratchets down and blows up their loan covenants, it is better to have it sit empty and lose money slowly ...
- fairity 5y ago
  The situation you're describing is lose-lose-lose, which makes me skeptical that it describes what's actually happening. The landlord loses out on rent payments (albeit at a lower monthly rate). The lending institution loses because the default rate increases if landlords stop collecting rent. Renters also lose due to artificially inflated prices. What's stopping the landlord and lender from re-negotiating loan covenants to enable the landlord to collect lower rent payments for a period of time without triggering a new valuation?

redis_mlc 5y ago

You missed out on the "dot bomb" in 2000. There were tunbleweed-like plants blowing around the streets of SOMA, and you could park on the sidewalk and nobody would notice or care. The vacancy rate was probably over 50%, and in some blocks 100%.

ttul 5y ago

At those vacancy rates, the only thing holding up rents is the overwhelming amounts of liquidity in the economic system. Land owners still have cash, in other words. Back in 2001, I rented an office for free. The landlord could then reduce his property tax rate by showing the city that it was occupied at zero rent. Stranger things might happen this time around with 20% vacancy.