No Signs of Slow Down in California’s Office Real Estate Market

No Signs of Slow Down in California’s Office Real Estate Market


– Even with the explosive development of office buildings in California, current construction may not be enough to satisfy upcoming demands. To better understand what’s going on, we spoke to some experts who are carefully watching
the state’s economics. – Overall, employment
of the office using type has completely recovered
from the Great Recession. – We have more fast-growing,
creative space users than ever before and we still haven’t seen growth in the professional sight. – There’s a real difference
in this recovery, where we lost jobs in
office using employment is not where we’re gaining jobs. – We’re sort of focused in
areas where there’s a lot of creative office type tenants, technology, entertainment, social
media types of firms. And if you provide those tenants with the right work environment
and the right location, there’s a tremendous
amount of demand for that. – It’s the reason tenants
are willing to pay higher rental rents is because
they’re technology companies, for the most part, are
more mature, and your rent, as a function of your
overall PNL, is minuscule. – We first thought that
companies maybe were competitive in terms of recruiting employees wouldn’t necessarily want
to be around each other, but we’ve found that the exact
opposite has been the case. Those types of companies actually like being around each other. And so the more companies that
sort of validate a location, I think the easier it is for
that next company to come in because they like to be near each other. – Our panel of developers
for San Francisco are both in the rental and occupancy rates very optimistic about 2017. As job growth continues, it’ll go out of balance
and induce more building, but there’s a lot of
building that’s going on now, and so that’s giving developers
some pause at this moment. – The San Francisco
market led the recovery. And the rise and rental rates
there on a percentage basis has just been very, very dramatic. And so I think there’s
bene a common sense people looking and saying, well in 2017, really how much higher can
it get, based on the fact that we’ve already had such
a dramatic amount of growth? Right now you have
employment growth steady and quite frankly, accelerating, not dramatically accelerating
but accelerating. You still have extremely available money, not only as far as its
just mere availability but at the rates at
which its being charged, so those are all really
the necessary components to drive further development. – Over the time we’ve
been taking this survey, the office market has been one that’s been kind of most responsive
to indicators of downturn. And we see no indication
in the office market that that’s occurring, in fact we see very consistent optimism among developers, all up and down the state when
it comes to office market. – Your common sense tells you that these things don’t go on forever. But there are really, there’s
nothing you can see right now that would say we’re at
the end of the cycle. – In order for development
to be going badly, you need to see people that buy land, and have to sit on it for a long time, and or make the mistake of building spec and then no one occupies it. We don’t have any examples of that. When we get those examples, then we’ll start talking
about how bad it is.

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