Mon, October 14
Office Development and Measure M
By Effect Measure M has on Office Rents and the impact it leaves for Startups
San Francisco was a once quiet industrial port city but as of recent decades been a hub for professional firms and internet startups. A key driving force as of recent years that has fueled this city's appetite for office space has been the money brought in by Venture Capital firms. Realizing the possible future gains on many of these startup technology business Venture Capital firms have dumped money into the market further fueling these office users to take more space in the market. Now with the pre-leasing of 88 Bluxome by Pinterest the competition has obviously gotten more fierce. One factor to consider moving forward is the impact of Proposition M on rents.
Proposition M was a measure adopted by the City and County of San Francisco in 1986 to limit the development of office space in an attempt to abate the displacement of lower income residential and commercial tenants. Under Proposition M San Francisco is limited to approving 950,000 square feet of office development each year (this applies only to office developments yielding more than 35,000 feet of space).
The initial thoughts on this topic usually start with a nod of agreement as 950,000 feet is generally agreed upon as a lot of space. However, when tech company's such as Google, Facebook, and Pinterest gobble up hundreds of thousands of feet at a time it becomes more clear why there is a shortage. This shortage of space has only lead to increased rents and locating office space tougher for the smaller tenants. When looking for space to lease for smaller tenants subleases are becoming more and more of a key factor in driving the smaller leases. As the growing company's move out of their now too small space for a single identity building or an entire floor-plate opportunity for the smaller newer tech startups is created.