Office Market Tumble Accelerating

The rate at which vacancy is climbing doubled in the first half compared to 2008

By Sharon Simonson

Nearly 40 million square feet of office space is vacant in the San Francisco Bay Area, up 5 million square feet in the first half of the year alone, according to a new report from brokerage NAI BT Commercial.

Even as the market cratered in 2008, developers delivered 5.8 million square feet of new office buildings across the region. That was on top of more than 2 million square feet brought to market the year before and about 1.2 million in 2005 and 2006 combined.

The report encompasses San Francisco, Marin, San Mateo and Santa Clara counties as well as the Interstate 880 and Interstate 80 corridors, which bracket the East Bay and extend toward Sacramento.

The most new development by far occurred in Santa Clara County, where nearly 5 million square feet came to market in 2007 and 2008. Nothing has been delivered so far this year.

By comparison, San Francisco office developers produced just more than 2 million square feet of new development in the last 30 months, including 114,911 in the first half of 2009, NAI BT said. San Francisco experienced the second-most new development in the four-and-a-half years covered by the analysis.

Tenants absorbed 13.5 million square feet above what they returned to market from 2005 through 2007, indicating a roughly 10-year supply of offices are available for occupancy today.

However, the rate at which office tenants are returning space to market is climbing fast, with 4.6 million square feet becoming available in the first six months of the year, nearly the same as in all of 2008.

West Coast Commercial Real Estate News