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SF skyscraper rents third highest in U.S. despite growth

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And we’re running out of space too

A photo of Salesforce Tower half-constructed, with smaller high-rises on all sides and construction equipment in the foreground. A mural of a gigantic, frightening bat is painted on the side of a building near the lower right of the frame.
The view of Salesforce Tower in August 2016.
Torbak Hopper

Turns out there’s at least one metric by which San Francisco rents are not quite the highest in the nation, although it’s still unlikely to leave anyone happy.

The professional service company JLL released its annual Skyline Report this week breaking down the price of office space in some of the tallest buildings in major U.S. cities (in the case of San Francisco ranging from the 19-story Hills Plaza to the 1,000-plus foot Salesforce Tower).

The big takeaway: Renting office space in any of these overwhelming obelisks cost $76.11/square foot in the first quarter of this year.

For perspective, that’s the third highest rate in the country, after only New York ($87.90) and Washington DC ($83.09).

This time last year the same figure was $75.88, which makes this such a small hike that its significant is hard to pinpoint.

But as recently as 2014 it was less than $64, so vertigo is still an appropriate response to recent gains.

Meanwhile, although most cities shoulder a vacancy rate of 12.9 percent in these kinds of buildings, San Francisco’s is a tidy 8.5 percent, while Oakland’s is an almost shockingly low 4.9.

But possibly the reason Oakland is filling in faster is that it has less space for which to account. Says JLL:

Already far and away the largest [...] market in the Pacific Northwest by number of buildings (54), San Francisco’s skyline keeps expanding while Oakland and San Jose’s have remained stable.

Just less than 4 million square feet of new Skyline product is under construction in San Francisco while the first construction in Oakland for several years began in the first quarter. A single 120,000 square foot project is underway in San Jose’s Skyline.

Christopher Michel

Note that San Jose’s rate is a somewhat tepid 12.4.

Despite the price squeeze, most of the city’s soaring spires are filling in fast, including several that have not yet even built.

Of the 54 buildings on the Skyline list, 10 of them are completely full, while only 15 are operating below 90 percent (including those not yet finished or not yet leasing).

For the curious, JLL reports that Salesforce Tower is already two-thirds full. And they haven’t even finished installing all the windows yet.