Commercial Real Estate
The commercial real estate sector finished 2007 in a strong position. According to Cushman & Wakefield, city-wide absorption has remained positive for 18 consecutive quarters. Overall vacancy in the central business district dropped to 8% from 11.5 % at year-end 2006. Overall rental rates for Class A space were $44 per square foot vs. $37.50 a year ago.
What does 2008 hold? By most estimates, San Francisco will feel the pressures of the economic downturn, but is in better condition than many other U.S. cities. Growth in the biotech, digital media and green technology sectors, combined with strong international interest and a relatively low rate of lease expirations, should lead to a steady but slower-paced market.
Although the overall commercial real estate market is likely to soften nationally, some urban areas will fare well, according to respondents to the 2008 “Emerging Trends in Real Estate” by PricewaterhouseCoopers and the Urban Land Institute. Global gateway cities such as New York, Washington D.C., San Francisco, Los Angeles, and Boston have become magnets for employers, residents and investors and will continue to do well.
Residential Real Estate
Last month was the slowest December since DataQuick began tracking residential information in 1988. Bay Area December numbers ranged from a high of 12,349 sales in 2003, to 8,372 in December 2006, to 5,065 in 2007. San Francisco’s numbers, while experiencing a decrease, were less affected than the other Bay Area counties. San Francisco sales fell by 24.4%, compared to the precipitous drops in Sonoma of 48.5%; Contra Costa 45.7%; Napa 43.3%; Solano 42.1%; Santa Clara 39.9%; Alameda 38.1%; San Mateo 31.7%; and Marin 28.0%.
Median prices for homes in San Francisco slipped about 2 percent, from $745,000 in December 2006 to $731,000 in December 2007, with an average downturn of 4.9 percent for the Bay Area at large. The largest decreases occurred in Contra Costa, Solano and Sonoma counties. Foreclosure activity was at record levels in 2007, with predictions for 2008 remaining cautious and concerned, as a number of variable rate mortgages are set to adjust this year.
December 2007 unemployment data show San Francisco with a 4.5 percent rate, compared to California’s 5.9 percent, and 4.8 percent nationally. Between December 2006 and December 2007 the largest employment gains occurred in the following sectors: professional and business services, leisure and hospitality, private education, health services and government — robust areas for the San Francisco Bay Area.
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Director of Business Development