Market Insight Editorial & Advice to Tenants: 4Q1999

About now the office markets of Vacaville, Tracy, Chico and Bakersfield must be looking good to tenants shopping for space in Multimedia Gulch and surrounds in the San Francisco Bay Area. 1999 went out with a tidal wave of deals. The stats below tell the story, one of record absorption of space around the Bay and seriously depleting stocks of 12-month-out supplies. One of our primary bellwethers of market conditions is the “Scheduled Vacancy” category, where we look down the road for the supply of new and renovated buildings to soften rental rates as that production materializes. Future commitments to that supply, however, have been monumental: Down 23% in just the last quarter in San Francisco; down a whopping 48% in San Mateo county; and down 16%, total, for all counties we cover.

Rental rates have been rising weekly, and there is much euphoria in the landlord camp. As we see annual rates swooning into the $60’s and $70s, landlords naturally wonder if we’re heading for $100/square foot territory. In a market with any control whatsoever, stratospheric pricing tends to shut down demand. However, we don’t appear to have any lack of demand—since VC backed companies continue to throw money (and sometimes stock) at building owners. Expect multiple offers on every space, and be ready with great credit, a compelling story about your company and enormous tenacity to get you into new space. Yes, we can help you. We continue to specialize in representing tenants exclusively.

Please note: We provide Bay Area market data and analyses for the current year only. To request commercial real estate market data for previous quarters, please contact us.

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