April 2009

Commercial Real Estate

First quarter 2009 commercial real estate market information indicates continuing downward pressure on rental rates and upward pressure on vacancy rates. Such information regarding this key indicator should come as no surprise, as San Francisco's unemployment rate increased from 6.5% in the fourth quarter of 2008 to 8.3% in the first quarter of 2009. Statewide unemployment for the quarter was 10.9%

According to Cushman & Wakefield, the first quarter of 2009 reflects the following changes: citywide (direct space) vacancy was 12.9% vs. 10.7% in the fourth quarter of 2008; Central Business District (CBD) Class A space was 10.5% vs. 9.1% in the fourth quarter of 2008. Non-CBD Class A space was 17.9% vs. 15.9% in the first quarter of 2008. Asking rates experienced decreases, dropping citywide to $38.48 from $44.56 in the fourth quarter of 2008. Class A space in the CBD dropped to $44.03 from $50.75 in the fourth quarter of 2008 and Non-CBD to $36.59 from $40.41. The impact of sublease space continues to increase, with over 777,500 square feet being added to the market in the first quarter, according to CBRE, providing tenants with a number of cost-effective alternatives.

Some Good News for SF Real Estate

• The Association of Foreign Investors in Real Estate (AFIRE) included San Francisco among its list of the top five US cities for real estate investment, adding that it plans to increase US lending by 58%.

• According to the real estate tracking firm Terradatum, more homes sold in San Francisco in the first two weeks of March than in the previous six months.

Upbeat Signs of the Times

• SFCED investor City National Bank is opening a second office in the Financial District to serve its growing base of San Francisco clients. The new Montgomery Street location brings the bank's total number of Bay Area branches to eight.

• Lowe's is reportedly close to a deal to occupy the old Goodman's Lumber site on Bayshore Blvd.

• The EPA is in the hunt for 300,000 square feet downtown to house its regional headquarters.

San Francisco Ranks High on Forbes List

San Francisco continues to rate high on Forbes' ranking of American cities, including:

• 1st for Broadband Adoption

• 2nd Best City for Singles

• 3rd for Culture and Leisure

• 5th in Educational Attainment-83.9% have a high school degree or higher; 43.1% have earned a college degree or higher.

In Other Rankings

• Sustain Lane ranks San Francisco the 2nd greenest city in the US, noting in particular our air quality, green buildings and green economy.

• SFO has been rated the best airport in North America by Skytrax.

• According to the Real Estate Forum, San Francisco comprises the 2nd largest market in the US for data centers.

SFCED News

SFCED Executive Director Dennis Conaghan will serve on the regional Bay Area Council Economic Institute's advisory board, providing information that will eventually lead to the funding of Bay Area economic stimulus programs. About $50 billion will flow into the State to be dispersed to regions as part of the stimulus package.

Where Angels Tread: Keiretsu Forum

The Keiretsu Forum, the world's largest angel investment network, is holding a premier gathering of the angel investment community, with up to 300 angel investors attending and 12 companies presenting. The event will take place on April 30 from 7:30 am to 1:30 pm at the PG&E Auditorium in San Francisco. For information, please email Maggie Jacobberger at Maggie@keiretsuforum.com or register at http://acepartnerguest.eventbrite.com/.

For more information please contact

Dennis Conaghan
Executive Director
415.352.8819
Email: dconaghan@sfced.org
http://www.sfced.org/