Reporter- San Francisco Business Times
This story has been updated to reflect PwC retracting its forecast of a decline in San Francisco office rents. The Business Times confirmed the decline with PwC twice. The firm has now said it made an error in one of the data points related to the decline.
San Francisco’s office and multifamily real estate markets will see a slowdown in rental growth and a contraction starting this year, according to a report by PwC.
PwC projects that new office construction will raise supply by around 6 percent, which will lead to excess space that “will put increased downward pressure on rent levels,” said Emily Pillars, partner at PwC.
The PwC report is based on responses from real estate investors and data from commercial real estate brokerages.
The forecast for Oakland’s office market is more positive. PwC forecasts expansion between 2015 and 2018, and the beginning of a contraction in 2018. San Jose’s office market is projected to have a downturn in 2015 and 2016, followed by recovery and expansion over the next two years. The overall U.S. office market is in a recovery this year, followed by expansion over the next three years, said PwC.
Other real estate economists disagreed with the severity of the report in regard to San Francisco. While they anticipate rents to grow more slowly in San Francisco, they do not expect them to fall sharply, barring a national downturn.
“Rental growth may be slowing, but our sense is vacancy is not necessarily going up,” said Colin Yasukochi, director of research and analysis at CBRE’s San Francisco office. “We don’t see a material change.”
San Francisco’s job growth and office market has been highly dependent on the tech sector, but Yasukochi notes that the industry encompasses many services including finance, professional services and healthcare. The sector is more stable compared to the dot-com crash in the early 2000s, he said.
Roland Li covers real estate and economic development