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A recent market report from Marcus & Millichap shows that class-A office space will take longer to recover compared to class-B and class-C space as companies no longer flee to the East Bay for discounted office space outside of San Francisco and San Jose.
Major metros have now adjusted their pricing and availability. Before the pandemic, prices in the East Bay and Oakland rang in 70% less than their surrounding major metros. However, increased availability may close the pricing gap.
That is why Marcus & Millichap anticipate that office vacancy will grow by just 80 basis points this year due to increased demand for lower-quality office space.
A Cushman & Wakefield report also found that San Francisco’s office market accounts for half of total market vacancy, where sublease space grew 587% from 2019 to 2020.
“Pre-pandemic there were 6.5 million square feet of tenants actively searching for space then technically falling to just over 3 million square feet, although even those searches were on pause,” said Robert Sammons, Senior Director of Research Northern California. “The figure has since recovered, now standing at a moderately robust 4.5 million square feet with active tours underway.”
