Fri, May 22
The Impact of COVID-19 on Tech
By The unprecedented outbreak of the Coronavirus quickly brought the office leasing market in San Francisco and much of the country to a screeching halt.
The unprecedented outbreak of the Coronavirus quickly brought the office leasing market in San Francisco and much of the country to a screeching halt. Leasing activity over the past two months has decreased by over 60%. With a new degree of uncertainty in the market tenants are now looking for a much smaller footprint and the obligations that go with it.
For the past two years we have already been seeing a decline in the funding Venture Capital firms are giving out to the technology firms they are investing in. This decline has been leading to more subleases which in turn has lead to competition between landlords and tenants to rent out space. Initially this was great news for commercial tenants as more office space came to the market creating greater competition for the tenants themselves. Now with the coronavirus we are going to see a larger correction than we initially expected.
The impact of the coronavirus on office space for rent in the short term has been slow and staggering. Many landlords are still holding out to see how this plays out and hoping to capture the high rents they were asking pre COVID-19. Now that requirements have changed and tenants are now looking to downsize as more employees work remote, we will see a larger inventory of office space for rent come to the market. One of the big contributors to this massive decrease in the need for office users is the increasing gap between the number of financial and professional businesses and the technology firms across the city, in other words we have had too many eggs in one basket. With the technology sector taking the biggest hit we are already seeing the effects of a decreased demand for office in San Francisco. We have already seen with Uber and Lyft laying off thousands of workers and the affect it will have on the leasing market is sure to follow. As we have read with the larger firms the smaller technology firms are also going through rounds of layoffs and furlough which will of course have a larger effect of the amount of office space for rent as more vacancies will appear and suites become available.
The best we can do is hope for the COVID-19 Virus to pass and allow for businesses to reopen. The damage has already been done, the best we can do moving forward is open businesses quickly and get the labor force back to work.