Vacancies at a New High in San Francisco

San Francisco’s downtown office vacancy rate set a new high in the first quarter and should rise throughout 2003 as the city reels from slumps in the technology and financial services sectors, according to a report issued Wednesday.

Moreover, rents for office space in the city’s central business district, which have been beaten down over the last two years, should fall even further as the city faces a glut of available space.

“It’s shaky,” Dick Robinson, a senior director with property broker Cushman & Wakefield, said of San Francisco’s downtown commercial real estate market.

San Francisco’s downtown office vacancies rose to 20.3% in the first quarter from 19.7% in the previous quarter as leases expired and about 300,000 square feet of vacant space hit the market, according to Cushman & Wakefield.

The city’s financial district reached an all-time-low vacancy rate at just under 1% in the second quarter of 2000 when it was the center of the dot-com industry and a magnet for venture capital and investment banking.

Meanwhile, rents in San Francisco’s financial district fell for the ninth straight quarter, dropping 3.8% from the fourth quarter to an average $30.60 per square foot for premium space.

When adjusted for inflation, that average first-quarter rent was below 1992 levels.

At its peak, financial district office space rented for an average $80.16 per square foot in the fourth quarter of 2000.