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SAN FRANCISCO—Strong leasing activity and sustained demand drove market fundamentals in 2014. For the year, asking rates grew by 14.2% to $63.24 and vacancy declined by one percentage point to 6.6%.
Net absorption nearly broke 2 million square feet, due to a combination of pre-leased construction deliveries and a record 17 deals over 100,000 square feet. Perhaps most noteworthy was that 87% of the 3.6 million square feet leased in the 17 deals was by technology tenants, illustrating the nearly insatiable appetite the sector has shown for large blocks of space.
Those stats are courtesy of CBRE, who also recently noted that office rents here in San Francisco could rise by 10% in 2015.
See graphs below for specific information on net absorption and vacancy and availability.
NET ABSORPTION
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Net absorption for the quarter was 330,270 square feet mostly due to the completion of 535 Mission that delivered over 200,000 square feet of pre-leased space to the market. The total absorption for 2014 was 1.99 million square feet, which was significantly higher than the past two years, but not quite enough to surpass the record 2.1 million square feet in 2011.
Looking ahead to 2015, a number of pre-leased construction projects are expected to deliver and continue this positive trend.
VACANCY & AVAILABILITY
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Market wide vacancy declined by just 10 basis points during the fourth quarter to 6.6%, while total availability declined by 50 basis points to 9.9%. The North Waterfront/Jackson Square submarket saw the largest drop in vacancy, while Mission Bay/China Basin had no vacant space at quarter-end. Sublease space accounts for 1.0 million sq. ft. of the 7.6 million square feet of overall availability, while total availability in the CBD remained at 11.2% as of year
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