Absorption:  Citywide Overall Net Absorption was +191,000 sf in the 4th quarter, bringing the 2009 Overall Net Absorption to a negative 2.35M sf. The CBD's share was almost 50% of this total.

Vacancy: CBD Overall Vacancy Rate (both direct and sublease space) fell to 12.9% in the 4th quarter, a 0.6% change, while the Class A Vacancy Rate rate fell similarly to 13.1%. Vacancy rates fell fractionally citywide, with the largest drop in SOMA at 2.2%.

Rent: Asking rents continued their citywide decline in the 4th quarter, falling citywide 1.1% to $33.18 and 0.9% to $35.83. in the CBD. Class A rents fared marginally better at $38.33 (a 0.6% decrease).

Activity: CBD and new citywide leasing activity remained virtually constant in the 4th quarter. New leases totaled 817,000 sf in the CBD and 1.1M sf citywide, less than a 0.07% variance.

Forecast: In all likelihood, there will be no true market improvement until international/national/local economies gain traction and produce demand for products/services, thus producing "jobs." The local economy has been hammered by losses in the tourism, financial, banking and professional service segments. Only the Life Sciences and Technology areas have cushioned the blows. Though the San Francisco office market has stabilized the last two quarters, it will not show significant growth until the economy strengthens.

Please contact me if you would like to discuss strategies that will maximize your opportunity to take full advantage of today’s market conditions or if you would like additional, detailed market information.

Mike Tobin
Senior Vice President, Partner
GVA Kidder Mathews
January 28, 2009