Real estate: Bay Area office sublease space soars, companies retrench amid coronavirus

SAN JOSE — The amount of office space available for sublease has risen in the Bay Area — and has more than tripled in San Francisco — an indication that work-from-home protocols amid the coronavirus may have prodded companies to rethink space needs.

Santa Clara County, the East Bay, and San Mateo County have all shown significant increases in sublease space, but San Francisco has earned the dubious distinction of suffering the largest increase by far in the Bay Area, according to a new report from Cushman Wakefield, a commercial real estate firm.

Significant increases in available sublease office space are a nationwide phenomenon but Cushman Wakefield indicated in its report that the Bay Area is being hammered  to a greater extent than the nation’s other major office markets, the Cushman Wakefield report shows.

“The increase in sublease vacancy has been widespread, though one region has been hit the hardest: the San Francisco Bay Area,” Cushman Wakefield stated in its report.

As of the end of June, San Francisco had 3.86 million square feet of sublease office space available, which was an increase of 2.81 million square feet. That equates to a jaw-dropping jump of 267 percent, or more than triple the 1.05 million square feet available at the end of 2019.

A comparison of San Francisco’s office market to Manhattan’s underscores the mammoth increase in space.

Manhattan, with 404.7 million square feet of office space, boasts an office market that dwarfs San Francisco’s, which has 83.5 million square feet of office space. But while Manhattan’s sublease space increased by 1.48 million square feet, that was far less than the increase of  in San Francisco.

From the end of 2019 through the end of June, the Bay Area’s four major office markets, Santa Clara County, San Francisco, the East Bay, and the Peninsula, endured a combined increase of 3.99 million square feet of sublease office space compared with an increase in sublease office space totaling 13.9 million for the entire country.

That means the Bay Area office markets accounted for 28.7 percent of the increase in sublease office space — even though this region accounts for only 8.9 percent of all the existing office space in the country.

“All of our major Bay Area markets recorded an increase over the first half of the year including Santa Clara County-Silicon Valley,” said Robert Sammons, senior research director with Cushman Wakefield.

Santa Clara County had about 5.48 million square feet of sublease office space available at the end of June, an increase of 399,400 square feet or 7.9 percent more than the end of 2019, Cushman Wakefield reported.

The East Bay, including Oakland, the 880 Corridor, the 680 Corridor, the Tri-Valley, and the Walnut Creek areas, had about 2.97 million square feet of sublease space available at the end of June. That was a 17 percent increase, or 430,900 square feet more compared with the end of 2019.

San Mateo County reported that 1.8 million square feet of sublease space was available at the end of June, which was up 24 percent, or an increase of 350,600 square feet, according to Cushman Wakefield.

With the onslaught of the coronavirus, tech companies were able to function with numerous employees working from home, and some high-profile tech firms put spaces up for sublease in San Francisco or terminated their leases. Pinterest and Twitter were among these.

“Tech-focused regions were heavily impacted by sublease vacancy,” Cushman Wakefield stated in its report.

It’s possible that companies won’t immediately rush back to reoccupy spaces they had vacated in the wake of state and local government mandates to combat the deadly bug.

And that potential reluctance could keep significant blocks of office space available for sublease.

“This significant amount of space will take some time to ‘work off’ even when workers return to the office,” Sammons said.

 


Article source: https://www.mercurynews.com/real-estate-bay-area-office-sublease-space-soars-tech-coronavirus

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