Big Tech’s grand return to San Francisco’s office market has been relaxed to say the least. As landlords wait patiently, other industries are emerging that could pick up the slack.
According to Kelly Glass, principal at Avison Young, professional services firms have been completing a large chunk of office deals as demand slowly rises.
“Tech is out there on the periphery and touring, but still homing in on what their ultimate return-to-office plans are, whereas these other professional services groups feel a little bit more comfortable about how they are going to utilize the space and are more active in signing deals and getting them done,” said Glass.
Still, demand seems to be trickling back into the region’s downtown area after tenants were previously priced out and opted for more affordable submarkets. However, geographic interest seems to vary by industry, with tech firms gravitating towards these submarkets while other industries still prefer downtown high-rises.
At the moment, Avison Young finds that asking rents are 10% below its peak of $90 per square feet for Class A buildings in 2019.
Overall, technology companies are still playing a significant role in current and future office trends. But the most notable change during this time has been the shift to smaller, more flexible leases.
“Two to three years seems to be more the ideal timeline, where it used to be five or seven. It’s that short,” said Glass.