EDITORIAL from Dan Mihalovich, Principal of Mihalovich Partners and Founder of The Space Place

If you're in search of intelligent life in the brokerage community…please enjoy this Editorial with my compliments. And, here are the last 10 years of pearls of wisdom:

Dan Mihalovich
President, Mihalovich Partners
Founder, The Space Place®
work: 415-434-2820
cell: 415-999-9244


2Q San Francisco saw ~580,000 square feet of net positive absorption of space...totaling around 1.4M sf for the year so far. Historically, that’s more than a year’s worth of absorption. The number of deals and the total amount of space leased, however, dropped to a 5-year LOW. Asking rental rates are still hovering at $50/sf/year Citywide, all classes of space. If you’re familiar with "spot" rates and "inverted" markets – that’s the current phenom, folks. With "only" 6.5M sf of space vacant/available, Citywide, for occupancy right now, landlords and sublessors aren’t focused on the 11.3M sf actually available for lease – the spread representing space available down the road.

Tenants who want to dodge bullets (since current market conditions are a killer for most traditional companies) have these options. Mihalovich Partners negotiates all of these types of transactions:

  • Renew short-term if the current landlord is willing to provide discounted rates to keep you in place;
  • Relocate to short-term sublease space. Short-term direct space may also be discounted, if the space is optioned to another party at the conclusion of the term;
  • Relocate out of the City;
  • Tenants whose leases do not expire for another 2-3 years and are convinced that the current “bubble” will continue to expand – may want to explore a blend-and-extend renewal. While these potentially premature transactions generate great fees for the brokers in the deal, they are rife with risk for the tenant and should be meticulously considered in all respects. Will market rates continue to rise? Why? How do you know? Will your company remain competitive if you lock in accelerated rental rates while your competition awaits a market decline?

2Q San Mateo County, net absorption of space bumped up to 220,000 square feet…but still well under 300,000 sf for the year so far. Like San Francisco, deal flow and the amount of space leased declined to a 6-year LOW. Asking rates increased to upper-$40s! Just under 6M sq ft available.

2Q East Bay (Contra Costa & Alameda Counties) roared like a PeterBilt to 900,000 sf of net absorption. You’ll have to look back 10 years to see such impressive absorption. Deal flow was its highest in three quarters. What does this mean? As we’ve always said, “markets work”, seeking equilibrium at all times. Average asking rental rates (all classes) are still hovering around $25/sf/year. Just under 14M sq ft available.

Look: Large Blocks of Space on the Market.

Large blocks of space available in the City: (square feet)
900 Battery 72,000
50 Beale 87,000
375 Beale 60,000
85 Bluxome 53,000
350 Bush 434,000 
340 Bryant 62,000
1 Cal 60,000
101 Cal 150,000
600 Cal 105,000
650 Cal 80,000
EC2 125,000
EC3 125,000
EC4 82,000
939 Ellis 95,000
Ferry Building 80,000
246 First 99,000
250 Folsom 750,000
795 Folsom 63,000
181 Fremont 435,000
199 Fremont 125,000
600 Harrison 92,000
301 Howard 49,000
505 Howard 83,000
875 Howard 57,000
100 Hooper 423,000
525 Market 75,000
1455 Market 275,000
123 Mission 84,000
415 Mission 700,000
535 Mission 37,000
315 Montgomery 80,000
345 Montgomery 50,000
1800 Owens 700,000
Pier 70 (Bldg 101) 45,000
Pier 70 (Bldg 113-116) 184,000
500 Pine 45,000
1000 Sansome 60,000
85 Second 60,000
235 Second 76,000
160 Spear 32,000
201 Spear 103,000
1001 Van Ness 84,000
1400-16th 27,000

Shared Workspace for $160/sq ft/year?! Hurts So Good.

Startups by the thousands have flocked to “co-working spaces” around the country to make their first home. To this office leasing veteran, “collaborative” space…”shared office space”…"executive suite space”…has been around since the beginning of time. The wave of national expansion and explosion of growth amongst space providers has become intensely competitive. As the building cranes fly, so has the co-location-space business to keep up with white-hot demand. In San Francisco, the old stalwarts like Regus, ServCorp and ReadiSuite have seen scores of recent births — and a few massive new players like WeWork. Just as startups put on the dawg to woo new employees, the suite operators have figured out how to endear themselves to the startup community. Free beer. C’mon. Cool digs. Dogs. Resources — not just the dry provision of office admin stuff, but access to VC/Angel funders, pitch-nights, financial advisory support, legal support, pet supplies and of course, adult toys. Trust that this dynamic is amazing for the providers — which is why you’re currently seeing ridiculous expansion from the provider community; and, wow, these environments are totally happening social and networking environments at apparently reasonable costs — with great flexibility for the startup community to grow and then go. 

But try to ignore the cost per square foot, folks. And the “lease” document? It’s essentially an adhesion contract, like a contract for renting a car. You’re not exactly invited to make changes. Just think: My way or the highway. Following (changing the name to Space to Go, “S2G”, to protect the guilty parties) are real-life economics for a client presently considering entering into a shared-space contract:


In order to equate S2G’s rent with “normal” rent for office space outside their Center, we should apply a interior circulation factor (40%) and a Building load factor (use 20%) to arrive at “rentable square feet” elsewhere. This is consistent with what we engineered into Griddig’s transaction platform tool, “Calculate”. 

So, a 96 square foot office at S2G = 96 times 1.40 = 134.4 “traditional usable square feet” times 1.20 load factor = approx. 161 “traditional rentable square feet”. S2G’s $2,150/month rent for 96 square feet corresponds to $25,800/year/161 rentable square feet, or $160.25/rsf/year. Not a bad mark-up for the S2G folks!

2Q 2015 Top Leasing Transactions

Tenant Address Sq Ft
Stripe 510 Townsend 300,000
FitBit 199 Fremont 164,000
Instacart 50 Beale 56,000
- 1 California 50,000
Castlight Health 150 Spear 45,000

Tenant Address Sq Ft
Rovi 2 Circle Star Way 104,000
NetSuite 2955 Campus Drive 94,000
Pebble Technology 900 Middlefield 54,000
- 2855 Campus Dr, San Mateo 49,000
ZS Pharma 1100 Park Place 38,000

EAST BAY COUNTIES (Alameda/Contra Costa)
Tenant Address Sq Ft
TE Connectivity 6900 Paseo Padre Parkway, Fremont 98,000
- 47100 Bayside Parkway, Fremont 61,000
Central Garden & Pet Co. 1340 Treat Blvd., Walnut Creek 33,000
Sonus Networks 6900 Paseo Padre Parkway, Fremont 33,000

If Your Lease Will Expire Within The Next Three Years…

or if there is another compelling reason to discuss your firm's office leasing situation, please call us. For qualified tenants, we offer the following pre-contract services:

  • Free preliminary office lease and operating expense review;
  • Free consultation to discuss project management, Team formation and project schedule;
  • Market surveys and our specific tenant-driven leasing recommendations ; and
  • Assistance in selection and coordination of all Team members throughout planning and negotiation phases.

Vacancy Rates: Are Your Options Fading?

Tenants should watch carefully to detect how and to what extent your field of options changes. Which size blocks of space are getting leased? Discussing vacancy and absorption rates can be confusing to some. What language makes sense to tenants? Tenants ask, "Tell me about my specific options. How many choices do I have?" Are your options fading, as a result of leasing activity? Review the chart, below, and let's discuss.

HOW MANY BLOCKS OF SPACE ARE AVAILABLE FOR YOU? San Francisco County San Mateo County Santa Clara County East Bay Counties
Q1’15 Q2’15
5,000–9,999 sq. ft. 244 240 Call us for more info
▼ 2%
10,000–19,999 154 136
▼ 13%
20,000–29,999 49 44
▼ 11%
30,000–39,999 17 25
▲ 47%
40,000–49,999 15 15
50,000+ 37 40
▲ 8%

You can request a free space survey, containing all direct and sublease space meeting your specific requirements. We can also provide building photographs, floor plans, leasing histories and more. To discuss your space needs in person, call 415-434-2820 or email

Five Brokerage Firms / 12M SqFt of Space / 430 Buildings Listed: How Do You Spell “Conflict of Interest”?

When we approach a prospective new tenant client, we tell them that we NEVER represent landlords, always avoiding this conflict of interest. So, which of our competitors—leasing firms—do the most landlord representation? Who’s marketing 70% of the space in San Francisco?

The top companies controlling the most space available are NOT landlords….Rather, they are office leasing brokerage firms acting with the landlord’s interest in mind. They are:

Cushman & Wakefield / DTZ
Newmark, Cornish & Carey

These brokerage firms control over 75% of all listings and are beholden to more than 400 local landlords, paid to drive up rental rates and drive down concessions for tenants.

Since their allegiance is committed to so many landlords, how can they possibly represent YOUR interests—the tenant’s interests—objectively and aggressively?

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