Trends in office real estate (vacancy and lease rates) provide insight into changes in investment and economic activity in a neighborhood[i]. How these changes impact a neighborhood and who benefits can vary greatly and is often contingent on a host of other neighborhood factors. For example, as office space availability becomes tighter and lease rates increase, there may be increases in the level of investment to improve property conditions, the number jobs opportunities, and employees frequenting neighborhood stores. Additional business activity in neighborhoods can also generate tax revenue through gross receipts taxes, which can in turn be used for civic improvements. Conversely, office space for non-profit organizations and small community businesses providing affordable services to residents may become unaffordable, forcing their closure or relocation outside of the area[ii]. Another consideration is whether the new jobs entering into the neighborhood will provide opportunities for employment to existing residents in the area.
Between 2011 and 2017, the amount of office/flex square footage within the CMTL boundary decreased by 852,558 square feet (by 6.7%). The amount of office/flex space had been increasing citywide but decreased by 6.5% between 2015 and 2017. Between 2011 and 2015, the office/flex space availability rate declined significantly – from 22% to 2% in the CMTL area and from 14% to 6% citywide. However, in 2017 availability rates increased in the strategy area and citywide, to 5% and 11% respectively. While the availability increased, this did not correspond to reduced lease rates. Prices continued to increase relatively linearly citywide, while the increase in lease rates slowed somewhat in the strategy area in 2017.
CoStar data from the Department of Real Estate, 2011-2015.
[i] Juan Carlos Cancino, Paul Chasan, Amy Cohen, Ellyn Parker, Alexander Quinn, Sarah Ritter, Kelly Rytel, Marlo Sandler, and Joaquin Torres. “Central Market/ Tenderloin Strategy.” San Francisco, CA: San Francisco Office of Economic and Workforce Development, May 2015.
[ii] Olivia LaVecchia, and Stacy Mitchell. “Affordable Space: How Rising Commercial Rents Are Threatening Independent Businesses, and What Cities Are Doing About It.” Washington, DC: Institute for Local Self-Reliance, April 2016. https://ilsr.org/about-the-institute-for-local-self-reliance/