San Francisco’s commercial real estate market may be foretelling a slowdown in the city’s heated technology-driven economy, as reported by Bloomberg.
Article Excerpt: A five-year frenzy for San Francisco office space may be cooling as venture-capital investments decline and tech firms slow their hiring from a breakneck pace. A pullback would be a marked shift for one of the hottest U.S. real estate markets.
“If you’re looking to move to San Francisco, the increase in subleasing availability is a sign that there’s still space available,” said Drew Murrell, citywide revenue manager in the division of budget and analysis at the San Francisco Controller’s Office.
Twitter, Zenefits
Twitter is subleasing 50,000 square feet at its 1355 Market St. headquarters, according to Matt Hart, executive managing director at Savills Studley Inc., a tenant brokerage.
Natalie Miyake, a spokeswoman for Twitter, declined to comment. The social-media company, which said in October that it would cut as much as 8 percent of its staff, has lost 67 percent of its market value in the past year.
Companies such as Intuit are banking space that they’re renting with plans for expansion but don’t yet need. The software firm is subleasing two floors at 22 Fourth St. “that we have in our portfolio for future growth,” said spokeswoman Diane Carlini.
Zenefits, which is occupying four floors at 303 Second St., is subleasing space to move workers to adjacent floors, said Jessica Hoffman, a spokeswoman. The human-resources software startup, facing investigations over compliance with state rules, said last month that it would cut about 250 jobs.
A big chunk of the subleasing space on the market comes from Charles Schwab Corp., which is subletting about 300,000 square feet as it combines its two San Francisco offices into one, while boosting staff in other states, including Colorado and Texas, said Sarah Bulgatz, a spokeswoman for the financial-services firm.
Jobs Slowdown
More than 1 million square feet in additional sublease space will likely be available this year, said Hart of Savills Studley. He said he’s more concerned about a shift in tenant demand.
“Many startups that were hiring 10 to 20 employees per month have adjusted to a net zero to three employees per month,” Hart said.
Jobs in San Francisco’s tech industry, which includes Internet, software-publishing and data-hosting companies, increased by an annual rate of 5.1 percent in January, half the 10.5 percent growth in the same period the year before, according to Amar Mann, a regional economist at the Bureau of Labor Statistics.
Bay Area companies releasing IPOs dropped to 26 in 2015 from 35 the year before, Savills Studley data show.
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