Pros and Cons of SF Core

Looking at a case study and more than pros what are some cons about the San Fran Core Office market?

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Comments (9)

Best Response
Dec 7, 2016

*Falling Employment growth, still higher than the US avg though.
*Cap rate compression making assets highly over valued (4-5 caps).
*Record high amounts of sublease space available (3.5m SF) as tenants are wanting to escape the over heated market.
*A glut of supply is to come online by 2018 (2.5m SF annually) forcing vacancy way up .
*Competition of East Bay (50% discount on rents) will compete highly with San Francisco slowing down absorption exacerbating the above point about new supply.

    • 2
Dec 7, 2016

How is transportation different from East Bay, is it close to the residential districts.

I'm an east coast guy, market for me.

Dec 7, 2016

Not sure on that.. I am not on the West Cost either.
I just know that San Francisco and Silicon valley are spilling downwards to San Jose and around to East Bay due to the astronomical rents.

Dec 7, 2016

Transportation is better and more concentrated in SF than East Bay. That being said, whining about Muni is every SF resident's favorite past time.

    • 1
Dec 8, 2016

wait a minute, WSJ in Sept just cited 3.4% unemployment.

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Dec 8, 2016

If that is in response to my first original point. I was talking about the growth of employment (jobs created) slowing down.
Meaning the total number of jobs available to new entrants in the job market is lowering. I am not surprised that there is such a low unemployment level in this market due to the attractiveness of the economic environment that it is experiencing. But the flip side is that excessive rents and slowing job creation MAY lead to a long term rise in vacancy.

Your original post was to look for cons in one of the highest performing office markets in the country. So that point may not be as much of a strong argument compared to the pricing issue of entering a market that is peaking.

    • 1
Dec 7, 2016

Dot com bubble 2.0 will collapse.

Dec 7, 2016

I'm hoping for this secretly... I want to go back to my hometown but I'd be trading a lot of space/lifestyle to move back there. I need prices to come back from orbit.

Dec 7, 2016