San Francisco landlords are pretty desperate for tenants these days — but just a little less so than earlier this year.
And that means they’re still willing to throw in sweeteners on top of lower prices. We chatted with Frank Fudem, a San Francisco real estate broker with NAI BT Commercial who works with all kinds of companies, including law firms. Fudem says “good class A space” that would’ve cost in the high $50s per square foot two years ago can now be had for the low $30s. (That chart at left shows you, courtesy of NAI BT, the sad state of current occupancy rates.)
And, he says, landlords are willing to pay just about whatever it takes to cover improvements — such as laying down quality carpeting, installing glass walls and high-quality lighting. A small tenant can even hope to get a kitchen with a sink (just the plumbing for that is $10,000). All these count among expenses that Fudem says tenants have to pretty much cover themselves in a seller’s market.
“Even an office-intensive tenant like a law firm can probably get enough money from a landlord to fund what it needs,” Fudem said.
Of course, there are limits. Fudem says no one should expect free linen wall coverings or fancy oriental rugs. Let’s be serious, here.
Fudem says this is a window of opportunity that won’t stay open forever. Occupancy rates have been dropping, but less precipitously than in previous quarters. That, he says, could mean we’re approaching the bottom of this cycle. And, he warns, when San Francisco landlords start raising rates, the upswing is typically sharp.
— Petra Pasternak