Space Matters – Recent Trends for Occupiers – Bay Area

Space Matters – Recent Trends for Occupiers – Bay Area

September 19, 2018 Off By Chris

We recently came out with a report that compared 13 Cities across the US and reported on tenant trends. The trends observed were concessions (tenant improvements + free rent), parking, and office density. Please read on to see how these trends stack up.

In lease negotiations, we are seeing tenants getting more concessions when we compared 2016 to 2017. In San Jose, we saw the total tenant package for TIs and free rent amount to $37psf in 2016 and that amount increased to $45psf in 2017. For San Francisco, we saw the total package in 2016 work out to $71psf and in 2017 it was $91psf. We are also seeing this trend in the East Bay markets although the numbers are lower because the rent is lower. It is also important to point out that tenant improvement dollars don’t stretch as far as they use to with higher costs of construction.

In addition to concessions, we are seeing a trend in parking. If you are located in a market that charges for parking, you should know that parking charges in the Bay Area rank among the highest in the country. While parking charges have remained relatively flat year over year the amount of parking available has been decreasing. With a decrease in supply, you can probably predict that the costs aren’t likely to stay flat in future years. Also, with less parking, being close to public transportation is important but don’t be surprised if rents reflect proximity to public transportation as well.

The last trend we have been tracking is the density in office spaces. When you look over the past eight years, San Francisco has seen a decrease in square foot per employee by 21.6% to 221sf/employee. San Jose has also seen a drop, albeit less than San Francisco, to 191sf/employee which is a drop of 3% over the past eight years. Since the Silicon Valley has more tech, you will see a denser configuration for those spaces. Density is a common strategy to use to lower occupancy costs but don’t make that decision lightly as I am seeing density used as a recruiting tool as a way to offer a better work environment.

Knowing the national trends for commercial real estate can make you aware of how your peers are handling their space needs and manage the increase in rents that they face. It is also important to know how far your tenant improvement allowance will actually go so you aren’t surprised by an unforeseen move cost. If you have questions, give me a call as I would welcome an opportunity to sit down and review your concerns and help you navigate your next move or renewal.

The link to the article is here.