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SAN FRANCISCO-A new report by the National Real Estate Index reveals a 6.2% drop in California’s average office rents this past quarter. The situation, caused by double-digit vacancy rates, is most visible in the San Francisco region.

A report by CoStar Realty shows the highest rents in San Francisco are in the Financial District, where rates are averaging about $40 per sf. Last quarter, the same space was listed for about $50 per sf.

The neighborhoods with the lowest rates this quarter are ones that were mostly occupied last year by Internet companies that have since gone under or are trying to keep from doing so. The Potrero and South of Market regions are asking $20-$30 per sf for space that, until this year, was being leased at $40-$60 per sf.

The Potrero and South of Market neighborhoods have a combined total of 1,803,111 sf available, including both direct and sublease space The Financial District has a whopping total of 5,497,885 sf available for lease or sublease. All submarkets have double-digit vacancy rates.

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