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The demand for SoMa space is making it a more expensive place to do business, however. According to Jones Lang LaSalle, the average asking annual rental rate of $57.19/square foot in the South Financial District in the third quarter represented a year-over-year hike of 9 percent. But in the surrounding SoMa submarkets to the west and south, the average asking rental rate spiked nearly 23 percent to $57.25/square foot over the same period. The average asking rental rate in the North Financial District climbed 12 percent to $57.96/square foot, Jones Lang reported.[contextly_sidebar id=”153ffcb15aa5668f6d8b09c1ded793ce”]Yet rent growth in the North Financial District could slow soon. Law and financial firms that historically kept the San Francisco office market upright during tough times are sitting on vast amounts of unnecessary space, Barker said, and they will consolidate into materially less square footage as leases expire over the next few years.
What’s more, the South Financial District rebounded from the most recent recession more quickly than its northern counterpart, said Amber Schiada, Jones Lang’s research manager for Northern California. That’s also a reversal of historical norms.
For those reasons, landlords in the North Financial District are trying to rehab the small floor plates in their high rises into creative space to lure tech companies. Those potential tenants are seeking nearly 2 million square feet of the 7 million square feet that companies in the market are hunting, according to Jones Lang.
In a few instances landlords with buildings on the southern edge of the district have succeeded in attracting SoMa tech tenants. Document productivity and workforce solutions firm Nitro PDF moved into 225 Bush St. a year ago, according to CompStak. The historic building, with its opening windows and high ceilings, is more likely to attract tenants looking for creative space, Barker said.
What’s more, earlier this year mobile security provider Lookout moved into One Front Street. There the landlord jettisoned the drop ceilings, Schiada added.
“It’s a little bit more difficult in a high rise to get the brick and timber feel or operable windows,” she said. “But we’ve seen some pretty cool build-outs.”
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