San Francisco’s booming tech market has driven up the city’s housing prices to unprecedented levels. Now it’s made the office rent price in San Francisco the most expensive in the country, too.
According to a New York Times report on Friday, San Francisco’s average office rent price was $72.26 a square foot in the fourth quarter of last year, up 14% from the previous year, narrowly beating Manhattan’s $71.85-a-square-foot price to top the country.
The report, which cited data from the CBRE Group, said it was the first time since the dot-com boom era of the early 2000s that San Francisco’s office rent price surpassed that of Manhattan.
The change is due in large part to the tech sector’s exponential growth in recent years, as nearly one-third of all office space in San Francisco is occupied by tech companies, The Times’ report said. Salesforce, Twitter, Dropbox, Adobe, Google, and Square are among the largest tech tenants in the city, each with more than 300,000 square feet of leased space.
“The market here in San Francisco has been largely driven by the tech industry, which has really been one of the growth leaders coming out of the recession,” Colin Yasukochi, CBRE’s director of research and analysis, told The New York Times.
The result isn’t too surprising considering that San Francisco and its surrounding Bay Area already have some of the most expensive housing prices in the country. San Francisco recorded the highest one-bedroom median rent in the country in January, while Oakland and San Jose each came in at fourth and fifth highest, respectively, according to online rental firm Zumper.
But it’s unclear how much longer the bullish real-estate market will continue in San Francisco. There have been signs of multiple tech startups based in San Francisco facing layoffs and cost cuts, and the funding environment to back these companies is also expected to cool down a bit this year.
Plus, some landlords are reportedly avoiding tech startups as tenants in order to diversify their portfolio and mitigate risks associated with the startups’ short financial history. Some landlords also expect an economic downturn looming in the coming years.