Bay Area office market flounders with empty space but demand jumps
The Bay Area office market remains feeble, battered by brutally high levels of empty spaces -- but tenant demand is rising.
SAN JOSE — The Bay Area office sector remains feeble, battered by brutally high levels of empty spaces — but the hunger by tenants to lease offices is starting to surge, new commercial real estate reports show.
Empty office spaces remained at or near record levels in the Bay Area’s four primary markets during the January-through-March first quarter of 2024, according to a new report released by CBRE, a commercial real estate firm.
The office markets in the South Bay, the East Bay’s Oakland-Emeryville region, San Mateo County and San Francisco continue to suffer from economic maladies in the wake of the coronavirus outbreak.
Office vacancy and availability rates remained sky-high in the first quarter of 2024, according to the CBRE report. The vacancy rate measures the space being offered for lease by property owners. The availability rate measures the combined amount of space that landlords offer directly plus the space tenants offer through subleases.
Here is how the four primary Bay Area office markets performed during the first quarter of 2024 and how they compared with the October-through-December fourth quarter of 2023:
— The South Bay office vacancy rate was 19% in the first quarter, worse than the 18.6% in the fourth quarter. The availability rate was 20.6% in the first quarter, an improvement from 21.1% in the fourth quarter.
— The East Bay market that includes Oakland, Emeryville, Berkeley, Alameda, Richmond and San Leandro had a first-quarter vacancy rate of 21.2%, which was worse than the fourth-quarter vacancy level of 20.6%. The first-quarter availability rate was 24.8, an increase from 23.8% in the fourth quarter.
— San Mateo County’s first-quarter vacancy rate was 21.7%, up from 21.5% in the fourth quarter. The availability rate was 23.6% in the first quarter, an improvement from 23.8% in the final three months of 2023.
— San Francisco’s office market remains the worst of the group by a wide margin, with well over one-third of that city’s office space empty. The vacancy rate was 36.7% in the first quarter, up from 35.6% in the fourth quarter. The availability rate was 39.1%, up from 38.5% in the fourth quarter.
The biggest hopeful sign for the office markets, however, is that tenants began to scout for office space more actively in these four markets during the first three months of 2024, the CBRE report determined.