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The San Francisco Bay Area office market continues to remain stable in the face of uncertain economic times. Vacancy rates are holding in all markets throughout the Bay Area while prices have fallen more as a result of new owners of properties becoming more realistic to rental rate acceptance by tenants.

Tech and start up firms continue to lead the office market in terms of expansion and growth. Supported by VC money that is still high on tech, new firms are sprouting up daily. Unlike the tech boom of the dot com days these firms are not financed with big dollars and no controls on spending. VC firms are investing in more sound start up platforms and monitoring their investments much more carefully this time around.

This has led to some challenges to building owners. First, most of these new firms do not want to commit to long-term leases. Often these firms are looking for 1 to 2 year commitments that don’t meet underwriting requirements by most corporate owners of properties. Landlords are looking for 3-5 year leases and in a number of cases 7-10 year commitments particularly if large tenant improvement dollars are required to secure the tenant.

These new tenants however are uncertain of their growth and success and are limited by their financial partners to making long-term commitments. Creative solutions are necessary to make both the landlord and the tenant happy. The good news is that San Francisco and the Bay Area are continuing to attract interest by these types of firms in our area.