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San Francisco Market Impacted by Low RTO, Rising Interest Rates, and Economic Uncertainties for 2023

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At the close of 2022, the San Francisco office market continued to be impacted by several factors including pandemic era shifts in office use, mounting layoffs in the tech sector, and a high interest rate environment, all contributing to a dampening in office demand.  Year-end 2022 marked another quarter of increasing office vacancy - reaching a new record high - after posting negative 800,000 square feet of net absorption, as many tenants continued to right-size, on average giving back more space than the segment of growing tenants. That said, there were cases of San Francisco companies making significant recommitments, with some users committing to more space than they had previously. After three years of strong tech hiring, many companies including big tech have announced hiring freezes and global layoffs. Even with announced layoffs, some of the largest big tech firms will still have more employees than year-end 2021, and office jobs numbers for San Francisco suggest a not insignificant level of pent-up demand. It all hinges on a sustained return-to-office trend. As of mid-December, RTO data compiled by Kastle Systems showed a slow but sustained increase in San Francisco, although the city remained one of the lowest recovered major markets in the U.S. Despite record high vacancy, Fourth quarter average asking rents experienced little to no change quarter-over-quarter. Furthermore, effective rents saw a slight uptick - likely due to continued flight to quality and not necessarily reflecting a general increase in rents.


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San Francisco Market Impacted by Low RTO, Rising Interest Rates, and Economic Uncertainties for 2023

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Derek Daniels

Research Director I San Francisco

San Francisco

Derek is the Research Director for Colliers International covering San Francisco, California. As Research Director, he leads the organizational and strategic development of the Research service offering for the San Francisco office and works closely with the Colliers brokers and leadership to provide market expertise to clients and procure new business opportunities.

Derek has contributed to regional and national reports covering a wide range of topics affecting commercial real estate. He leads the development of thought leadership content in San Francisco, tracking real estate and real estate-adjacent trends at both the market level and individual asset level.

With 17 years of real estate experience in the Bay Area, Derek is an expert across multiple markets including San Francisco and the East Bay, where he covered the office and industrial sectors in Oakland, the Tri-Valley, and Walnut Creek.

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Kitty Aguilera

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In her role as Managing Director, Kitty supports brokerage operations and drives business development, recruitment and retention within the region  focusing on our offices in San Francisco, San Francisco Peninsula, Silicon Valley and Oakland. 

Kitty is an international corporate real estate professional with 13 years of experience delivering strategic portfolio solutions. She specializes in using her knowledge of a broad range of portfolio workstreams to help clients build and execute strategic plans for success. She is adept at navigating the intricacies of internal CRE structures and has a strong ability to build consensus and drive alignment among multiple stakeholders. She thrives in a collaborative team environment and enjoys building long lasting, positive relationships.

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