Go Figure: Vacancies Up, Lease Rates Down

SAN FRANCISO-Office rents are going down and vacancy rates have hit a four-year high in some cases, according to a study released by Berkeley-based Rosen Consulting. The news is not all grim, however, because while the amount of square footage leased is down, the number of lease deals hasn’t shown the same proportionate drop.

An analysis by Rosen, a real estate and economic research firm, says vacancy rates in the South of Market area have shot up dramatically from just a few months ago. Vacancies of class B space have gone from 2.3% in late December to 16.5% now. At the same time, class B offices that rented for an average of $72.96 per sf a year ago are now going for $55.32 per sf. Rents in class A offices are down from $80.16 per sf at the end of last year to $74.16 per sf now.

In all, Rosen has predicts that four million sf of office space will pour onto the market during the next year because of dot-com flameouts. Those vacancies will be compounded with an additional six million sf of newly built and renovated offices. San Francisco already has about 70 million sf of office space.