Is San Francisco Commercial Real Estate Taking a Downturn?

Posted by Staff Reporter ( on May 02, 2016 08:35 PM EDT
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Realtors Lower Housing Market Sales Forecastmore big
SAN FRANCISCO - JUNE 06: Rows of houses stand in front of the Golden Gate Bridge June 6, 2007 in San Francisco, California. The National Association of Realtors announced today that it is lowering its forecast of the U.S. housing market as home sales continue to be weak. The NAR predicts that existing home sales will drop 4.6 percent to $6.18 million instead of 2.9 percent as previously forecast and new home sales are expected to slip 18.2 percent to 860,000 compared to the previous prediction of 17.8 percent. San Francisco has seen an 11 percent increase in inventory of properties listed for sale. (Photo : Justin Sullivan/Getty Images)

San Francisco's real estate market is largely affected by the tech industry that proliferates in the city. As earlier covered here on Realty Today, reports said that the tech sector is in the early stages of corrections in terms of job growth and consequently the real estate market is going to experience a slowdown. Most recently, Boston Properties has warned that the SF commercial real estate is heading for a downturn.

According to Business Insider, big tech companies in San Francisco have slowed down in taking in commercial properties, although strong growth remains in the city. The publication quoted Boston Properties President Doug Linde saying that "I think the big difference between the market then i.e. in 2014 and 2015 and today is really the lack of large growth requirements, and by that I mean big tenants over 300,000 square feet."

"In 2013, 2014 and 2015, you had unprecedented large growth from Google, and Dropbox, and, and Uber, and Stripe, and Slack, and LinkedIn, and they're just not there today," Linde added.

Nonetheless, Linde said that while overall there is a slowdown in office space tenancy, there is still a strong demand as the technology market remains expanding.

Meanwhile, Consumer Affairs reported that San Francisco has become an unaffordable place to live for many in the past half a decade as home prices skyrockets. The high prices of houses in the city is driven by the imbalance between supply and demand, particularly after the recession where about half a million jobs were created but house building activities were not able to catch up. With many buyers looking for a place to live in SF but not much to choose from, the report citing the data from Home Value Forecast said that an average home in the market costs $1.2 million.

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