Market overview of the SOMA real estate market Q2 2009.

1. PREPARED BY DONNETTE CLARENS AND ELIZABETH HART
415-513-2170 SOMA Office Market
dclarens@ccarey.com – Lic #01234877 Submarket Update – 2nd Quarter, 2009
ehart@ccarey.com – Lic #01499002
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Market Statistics SOMA Office Market
Availability Net Absorption Historical Vacancy vs Asking Rates
Total Inventory (sf)
(%) (sf)
$39.00 30.00%
SOMA 10,679,148 27.33% (110,497) $37.00 28.00%
26.00%
Asking Rental Rates
SAN FRANCISCO 83,604,019 17.45% (455,936) $35.00
24.00%
Vacancy Rate
$33.00 22.00%
Availability 20.00%
$31.00
Total Available Class A Asking Class B Asking
18.00%
(sf) Rents Rents $29.00
16.00%
SOMA 2,918,108 $31.60 $28.58 $27.00 14.00%
SAN FRANCISCO 14,589,615 $35.49 $28.20 $25.00 12.00%
1Q '08 2Q '08 3Q '08 4Q '08 1Q '09 2Q '09
Asking Rents Vacancy
Leasing Activity Trends
While relatively few large transactions have been completed during the 2nd
quarter, activity has picked up significantly this summer. Companies looking for
economical deals can find them in buildings like 480/490 2nd working to increase
their low occupancy rates and economical subleases from companies seeking to
offload a greater real estate portfolio, such as Yahoo, MySpace etc. The lower
end of the market continues to be in the $18 Full Service range. In contrast to
these economical options, the trophy assets of SOMA (128 King, 139 Townsend
etc) continue to achieve SF market premiums in the high $30s due to their low
vacancy, ease of transportation to Silicon Valley and high end creative feel.
Large blocks of space across SOMA continue to sit vacant, like 370 3rd (300,000
sf) and 650 Townsend (400,000sf). However, large users such as Twitter, Yelp
and Zynga continue to shop the market and evaluate alternatives for their long
term growth. We anticipate that within the next quarter at least one if not
more of these larger tenants will secure a new location in San Francisco, which 480/490 2nd Street, San Francisco has completed four deals in
2009 and is eager is make more.
will be touted as an uptick in leasing momentum.
Tech Transactions across the Bay Area
The outlook for SOMA still remains relatively strong in comparison to other SF
markets due to its attractiveness to the technology community. Technology and
venture capital transactions remain a lion’s share of our region’s lease transactions.
Other popular locations for early stage start ups like downtown Palo Alto and
downtown Mountain View boast much higher rents and lower vacancy than SOMA ,at
$5.75 Full Service and $3.75 Full Service respectively. SOMA continues to be an
economical location in relation to the other hot spots for tech start ups, due to the
negative market impact by neighboring financial district of San Francisco.
During the last quarter, Greylock made a substantial investment in the Bay Area by
moving their headquarters from Boston to a new building on Sand Hill Road in Menlo
Park. YCombinator, a well known incubator for early stage companies, also shut
down their Boston facility in exchange for their Mountain View location and a smaller
footprint on Howard Street that houses many of the Ycom companies in San
Francisco.
Across the Bay Area, notable tech transactions include Sony’s 282,000 renewal on
919/989 E. Hillsdale/950 Tower Lane in Foster City and EHealth Insurance Services
25k renewal on Middlefield/435 Whisman in Mountain View (they also have a pending
deal at 128 King Street in San Fancisco). Webjuice Media also subleased 17k from Pay
Pal in Downtown Mountain View at 303 Bryant.
139 Bryant Street, San Francisco
SUBMARKET UPDATE

2. PREPARED BY DONNETTE CLARENS AND ELIZABETH HART
415-513-2170 SOMA Office Market
dclarens@ccarey.com – Lic #01234877 Submarket Update – 2nd Quarter, 2009
ehart@ccarey.com – Lic #01499002
______________________________________________________________________
Significant SOMA Lease Transactions
Tenant Square Feet Type Location
Obscura Digital 36,000 Direct Lease/Growth 2130 Third
United BioSource 30,000 Direct Lease/Growth 303 Second Street (South Tower)
Navasite 22,000 Renewal/Static 650 Townsend
Zynga 20,000 Direct Lease/Growth 444 DeHaro
Scribd 10,000 Direct Lease/Growth 539 Bryant
Forecast
Continued increase in leasing velocity due to pent up demand
and a soft rental market. Very high end creative spaces in
SOMA continue to demand a SF market premium, but
Tenants increasingly use economical sublease rents as a
stocking horse in lease negotiations. Blends and extends for
companies that are above market continue, particularly in the
tech sector, to preserve cash and minimize burn rate.
Office Vacancy By Submarket
13.91%
444 De Haro, San Francisco, Zynga
Zynga continues to expand within 444 DeHaro to accommodate its growth. They
are also in the market for an 80k plus sf facility as a longer term option.
27.33%
10.99%
10.97%
9.40%
9.13%
North Financial District South Financial District
North Waterfront/Jackson Sq. Van Ness/Civic Center
Union Square SoMa
539 Bryant, San Francisco, Scribd
Scribd relocated to SOMA from 211 Sutter Street in Union Square. Tech
companies are attracted to SOMA for its creative feel and ease of transportation
and amenities.
SUBMARKET UPDATE