Part 1 of 2

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SAN FRANCISCO—“With memories of the Great Recession of 2008receding faster with each passing quarter, a wave of technologycompanies continued to surge into San Francisco at unprecedentedlevels during the fourth quarter, devouring existing office spaceby signing long-term leases and buying once-languishing investmentproperties, translating into a healthy fourth quarter andforeshadowing what should be a robust 2015.” That is according to arecent Q4 report from Colliers International on the local officemarket.

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With positive net absorption of more than 257,000 square feetrecorded in the fourth quarter, the firm says that San Franciscoeclipsed the annual absorption level recorded for the past 12 yearswith 2.8 million square feet of net growth for the year, farexceeding the City's annual average of about 1.1 million square.“The final three months of the year also was the 18thconsecutive quarter of positive net absorption, an enviable recordby any measure, but especially when compared to many other majormetropolitan areas that have continued to witness stubbornly highvacancy rates and inconsistent rates of absorption,” Colliersreports.

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Executive managing director Alan Collenette, notes that “SanFrancisco's Golden Age is here now. This is the Gold Rush, and thecurrency is innovation. The City is now the undisputed urbanepicenter of the world's knowledge-based economy.”

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Collenette says that “The rate of acceleration in the Bay Areaeconomy dwarfs that of the US, a contrast that makes SanFrancisco's explosion all the more stunning. It is impossible tooverstate the cause and effect of the deluge of tech sector venturefunding entering the Bay Area (51 percent of all U.S. VC money), asit encounters a heavily constrained supply of office space andhousing.”

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Due to new construction hitting the market, the vacancy rateremained flat this quarter at 7.5%, the report says. Vacancy hasdecreased for four straight years, the report said, and that's a51% shrinkage rate since the most recent peak of 15.2% in 2010.

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For the year, 1.5 million square feet of newly completed spacewas added to the market, the report disclosed. Overall, the Cityhad a total 89,580,305 square feet of existing office space in allclasses at year end. Colliers also reported 5,161,899 square feetof office space under construction at year end with another12,643,043 either proposed or in various stages of planning.

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As a result of the high volume of leasing and sales, occupancylevels climbed in several of the City's key submarkets during thequarter, including the South Financial District and Potrero Eastsubmarkets, which experienced the biggest jumps in occupancy at148,453 and 99,930 square feet of positive net absorption,respectively.

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Stay tuned for more from this report in part 2 of the story,where Colliers reviews demand, and who will absorb the spacequickly.

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Natalie Dolce

Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.