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SAN FRANCISCO-A recent report released by Brian Topley of Starboard Commercial Real Estate indicates that the commercial real estate market is finally showing signs of stabilization. Vacancy rates for the Financial District office space have been stable for 4 consecutive weeks at 8%, he says, and average rents for the area are stable at about $35 per sf annually.

Topley attributes the lack of volume to the distance that was created between tenants and landlords, rather than to a lack of tenants. As tenants began to realize the slip in the market would give them the upper hand and more bargaining power, landlords still weren’t prepared to make deals at market rates.

“In the last month, however, I’ve observed a definite uptick both in the number of tenants seeking space as well as those who are ready to commit to a lease,” says Topley. “Last week, two of my clients became involved in competitive bidding situations for spaces. This comes as a surprise to landlords, who for much of 2001, were lucky to receive any offers on their spaces.”

This gives realtors hope that San Francisco’s commercial real estate market may be heading toward a slow recovery following a huge blow that knocked rates down falling more than 50% in some submarkets. Landlords suffered, real estate transactions decreased, and the market became so bad that rents were drastically reduced.

“Bubbles form and bubbles burst, but recovery is inevitable,” says Topley. “Just when and how fast this recovery occurs is a question that perplexes business managers and landlords alike. Business managers will hold off signing a new lease or renewal until they feel prices are stable. Landlords are concerned about letting their precious real estate go in a distressed market and will wait for the market to stabilize. Stability is the grease that keeps the economic machine running.”

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