San FranciscoÂ's commercial real estate market, hammered by the cityÂ's dot-com bust, technology meltdown and financial services shakeout, will have a vast supply of empty office space for years to come, according to a report on Wednesday.
A return to single-digit vacancy rates will require San Francisco businesses to create 30,000 new office jobs to fill 8.5 million square-feet of empty office space -- a goal that would take more than six years at the historic local pace of job growth, according to the report by real estate services company Cushman & Wakefield.
San Francisco currently has 15 million square feet of office space available for rent, or about half the total square footage of office space in downtown Los Angeles, Cushman & Wakefield analyst Craig Beacock told Reuters.
San FranciscoÂ's third-quarter city-wide office vacancy rate was 21.5 percent and its downtown vacancy rate was 19.4 percent, both slight improvements over second-quarter levels, Cushman & Wakefield said.
In the second quarter of 2000, when San Francisco was at the center of the Internet boom, the city had faced a shortage of office space, with an overall vacancy rate of just 1.3 percent.
Since then San FranciscoÂ's unemployment has more than doubled to 6.8 percent in August from 2.6 percent in March 2000, according to the California Employment Development Department.
The small drop in vacancy rates from the second quarter came amid increased leasing downtown led by law firms and a slowdown in new office space entering the market, the report said.
Slightly tighter vacancy rates, however, are temporary because several big and mostly vacant projects will be completed over the next nine months, the report said.
'Considering the new buildings coming on line and the slow absorption rate, we predict vacancy to rise slightly, peaking mid-year 2003 around 22.5 percent,' the report added.
Downtown San Francisco is poised for a faster real estate recovery than other city areas as tenants return there after having been pushed into less expensive areas at the peak of the local real estate market, it said.
(source: Cushman & Wakefield and Reuters)