SAN JOSE — Downtown San Jose and San Francisco proceed to suffer from extremely high emptiness rates. Despite minimal improvements within the industrial real estate sector, greater than a 3rd of offices are currently vacant.
The grim statistics come from recent reports from Savills, a industrial real estate company that closely monitors the country's inner-city office markets.
The slow return to offices within the wake of the coronavirus pandemic has shaken urban cores, forsaking a forbidding landscape of empty spaces, low rents, falling property values and – especially in San Francisco – a wave of foreclosures of office, retail and hotel properties.
Here are Savills' reported details of downtown San Jose and San Francisco office emptiness for the primary quarter of 2024 (January to March):
– In downtown San Jose, the office emptiness rate was 35.6% in the primary quarter, in comparison with 35.7% within the fourth quarter of 2023.
– San Francisco had an office emptiness rate of 36.3% in the primary quarter of 2024, in comparison with 36.7% within the fourth quarter of 2023.
Savills has not studied the downtown Oakland market. Colliers, a industrial real estate firm, monitors the downtown Oakland sector. According to Colliers, the emptiness rate for downtown Oakland office space was 19.7% in the primary quarter, barely worse than the emptiness rate of 19.6% within the fourth quarter of 2023.
So far, office constructing owners have managed to maintain rents relatively stable in each downtown San Jose and San Francisco, but it surely could also be difficult for constructing owners to keep up this trend.
In San Francisco, the worth of the famous One Market Plaza has plummeted by 29 percent. Another office constructing on Market Street recently suffered a 90 percent drop in value when it was sold.
The values of office buildings in downtown San Jose have also fallen dramatically.
In December 2023, the acquisition of the office tower 303 Almaden Blvd. for $23.8 million represented a 70% loss in value in comparison with the last sale of the tower in 2017.
In February 2024, the two-tower office complex on the corner of North Market Street and West St. John Street was purchased for $34.2 million, a price 77 percent below the constructing's value when it was last sold a couple of years ago.
By coincidence, the buyers of the 2 office complexes in downtown San Jose were groups led by George Mersho, the managing director of Shoe Palace.
The fundamentals that had helped downtown San Jose office prices and rents soar to previously unimagined heights began to crumble in 2020 with the coronavirus outbreak and government-mandated business closures to contain the spread of the deadly virus.
Worse still, starting in 2022, tech firms began cutting jobs en masse within the Bay Area, a discount in workforce that also curbed their need for office space.
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