Keeping Expensive Company: S.F. Joins World’s Priciest Cities For Office Space
San Francisco has the fifth-most expensive “prime” office space in the world, according to commercial brokerage Newmark Grubb Knight Frank’s 2015 Global Cities Skyscraper report.
San Francisco’s most expensive offices, mostly located on the top floors of skyscrapers, have rents of $97 per square foot, said Newmark. San Francisco was beaten in costs only by Tokyo, London, New York and Hong Kong, which had the highest prime office rents of $250.50 per square foot, according to Newmark. San Francisco outpaced global centers like Singapore, Sydney and Moscow and beat out every other U.S. city, aside from New York, in the report.
Climbing skyscraper rents are an indication of the revitalization of cities. Companies are looking to retain workers by offering more collaboration within modern buildings and locations in central business districts, according to Newmark.
“A high quality office environment is an essential part of building a business. With the economy improving, firms want offices that provide an inspiring place to work and demonstrate they value their employees,” said William Beardmore-Gray, head of global leasing services at Knight Frank.
San Francisco’s rental growth for upper floor skyscrapers was 2.1 percent, the eighth highest, during the last six months of 2014. New York’s midtown neighborhood led the way with a 20 percent jump, according to Newmark Grubb Knight Frank.
The report only considered the most expensive part of the market. Most San Francisco Class A buildings have rents in the $60. Either way, the city has become one of the hottest markets in the world, largely from the strength of the tech industry.
“San Francisco is certainly one of the most expensive cities for prime office space in the world and is experiencing the fastest rate of cost increase in the U.S.,” saidColin Yasukochi, research director at CBRE’s San Francisco office. CBRE ranked San Francisco as the ninth-most expensive city in the world for prime office space in a January report.
The buildings with the highest rents in San Francisco include 101 California St., 555 California St., the Ferry Building, Embarcadero Center and One Market Plaza to name a few. In Silicon Valley, prime buildings can also command huge rents. Venture capital firms along Sand Hill Road in Menlo Park pay $132 per square foot, and BNY Mellon Wealth Management is paying $114 per square foot at 537 Hamilton Ave. in Palo Alto, according to an industry source.
Although San Francisco has high rents, its towers are not very tall compared to the rest of the world. The Transamerica Pyramid is 1,065 feet and the only completed building in the city over 1,000 feet. The under-construction Salesforce Tower will be 1,070 feet. New York’s One World Trade Center is 1,776 feet tall including its antennae, and the world’s tallest building, Burj Khalifa in Dubai, is a staggering 2,717 feet. There are 79 towers over 1,000 feet today, up from 19 in 2009, and 40 percent are in China.