The amount of available sublease office space has soared in the Bay Area due to the coronavirus, but Marin County is in better shape than most markets, a commercial real estate firm says.
Significant increases in available subleases are a nationwide phenomenon, but the Bay Area is being hammered to a greater extent than the nation’s other major office markets, according to a report from Cushman & Wakefield.
While Marin has also shown an increase in its sublease inventory, the county does not have the same peaks and valleys as the San Francisco market, where available space for sublease has more than tripled, said Whitney Strotz, executive managing director of Cushman & Wakefield’s North Bay offices.
“The Marin market just isn’t as dramatic,” Strotz said.
Moreover, with work-from-home protocols seemingly prodding companies to rethink office space needs, it appears that Marin County has caught the eye of several San Francisco organizations, Strotz said.
“Anecdotally, we are seeing demand from organizations previously located in San Francisco looking to relocate to Marin,” Strotz said. “This is a trend that had started pre-pandemic and continues to be a factor in the demand equation for office space in Marin.”
Strotz said companies are realizing that a good bulk of the professional workforce live in or are moving to the North Bay. Offering an office for them closer to their homes is starting to make more sense, he said.
As of the end of June, Marin County had 143,868 square feet of sublease office space available. That is an increase of 6,450 square feet from the end of 2019, representing a 4.6% increase, which is a far better position than most of the Bay Area.
There are also approximately 1.81 million square feet of office space available for a direct lease. Overall, there is a 13.4% vacancy rate for Marin office space, according to the firm.
Strotz said clients are on the market for Marin properties that offer features like outdoor work areas, ample parking, updated interiors, proximity to local shopping and easy freeway access.
Matt Brown, president and owner of Meridian Commercial in San Rafael, said while some Bay Area companies might be looking to move north of the Golden Gate, the cost of real estate is still high in Marin, and the inventory isn’t necessarily there to support big business.
“We are seeing people move their homes from San Francisco to Marin, but not necessarily business owners,” he said. “In my observation, there are some smaller companies looking for space in Marin, but because Marin has such a limited supply, relatively, we don’t see the big trends that other markets see.”
However, Mike Blakeley, president and CEO of the Marin Economic Forum, said there is an opportunity to attract businesses that in the past thought the Marin market was too small.
“There isn’t a specific effort right now that MEF is engaged in to attract business, but it could be something the community desires down the road when we look at how to recover from the impacts of COVID-19,” he said.
Robert Eyler, chief economist of the Marin Economic Forum, added that more business in Marin could mean more jobs, less commuter traffic and more time for locals to spend on other economic activity.
“One of the biggest questions is, are these moves being considered long term?” he said. “Are businesses looking at Marin for office space signing long-term leases or short-term leases? That hasn’t yet been answered to understand the real effect.”
As of the end of June, San Francisco had 3.86 million square feet of sublease office space available, which was an increase of 2.81 million square feet. That equates to a jaw-dropping jump of 267%, or more than triple the 1.05 million square feet available at the end of 2019.
A comparison of San Francisco’s office market to Manhattan’s underscores the mammoth increase in space.
Manhattan, with 404.7 million square feet of office space, boasts an office market that dwarfs San Francisco’s, which has 83.5 million square feet of office space. But while Manhattan’s sublease space increased by 1.48 million square feet, that was far less than the increase of in San Francisco.
From the end of 2019 through the end of June, the Bay Area’s four major office markets, Santa Clara County, San Francisco, the East Bay, and the Peninsula, endured a combined increase of 3.99 million square feet of sublease office space compared with an increase in sublease office space totaling 13.9 million for the entire country.
That means the Bay Area office markets accounted for 28.7% of the increase in sublease office space — even though this region accounts for only 8.9% of all the existing office space in the country.
Santa Clara County had about 5.48 million square feet of sublease office space available at the end of June, an increase of 399,400 square feet or 7.9% more than the end of 2019, Cushman & Wakefield reported.
The East Bay, including Oakland, the 880 Corridor, the 680 Corridor, the Tri-Valley, and the Walnut Creek areas, had about 2.97 million square feet of sublease space available at the end of June. That was a 17% increase, or 430,900 square feet more compared with the end of 2019.
San Mateo County reported that 1.8 million square feet of sublease space was available at the end of June, which was up 24%, or an increase of 350,600 square feet, according to Cushman & Wakefield.
With the onslaught of the coronavirus, tech companies were able to function with numerous employees working from home, and some high-profile tech firms put spaces up for sublease in San Francisco or terminated their leases. Pinterest and Twitter were among these.
“Tech-focused regions were heavily impacted by sublease vacancy,” Cushman & Wakefield stated in its report.
It’s possible that companies won’t immediately rush back to reoccupy spaces they had vacated in the wake of state and local government mandates to combat the deadly bug. And that potential reluctance could keep significant blocks of office space available for sublease.
Robert Sammons, senior research director with Cushman & Wakefield, said, “This significant amount of space will take some time to ‘work off’ even when workers return to the office.”
The Bay Area News Group contributed to this report.
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Office space glut sweeps region, but Marin not as severe - Marin Independent Journal
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