File: Downtown San Francisco. The commercial real estate vacancy rate has hit an all-time high in the city.San Francisco’s office vacancy rate hit a new record high in the first quarter of 2023, according to a recent report fromThe vacancy rate in the first quarter of 2023 climbed to 29.4%, up from 27.6% in the fourth quarter of 2022 — and far surpassing the previous pre-pandemic high of 19.1% during the dot-com bust in 2003. But this is unlikely to be a record for long.
Even with the vacancy rate rising, asking rents for space haven’t budged much, declining by about 60 cents from the fourth quarter of 2022. Instead of reducing prices to try to attract new tenants, property owners have opted to offer incentives to new tenants, such as free months of rent and interior improvements. “Historically, rents have declined during periods of high vacancy and economic turmoil.
In most major cities across the country, the office vacancy rate can vary greatly by building type. Newer buildings with modern amenities that are the most desirable with employers, typically known as Class A buildings, have a lower vacancy rate than the overall supply, according to data from commercial real estate firm Cushman & Wakefield. With supply and demand so unbalanced right now, other types of office space in San Francisco lacking Class A-level perks could stay empty for years.
Big tech companies are continuing to shed office space, adding considerably to the growing vacancy rate. Just last month,
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