Bay Area Office Sales Increase Even as Prices Come Down

The number of Bay Area office transactions has doubled since last year, according to a new report from Yardi subsidiary CommercialEdge, with buyers picking up deals as prices fall and vacancies continue to rise.

The data shows that 54 office deals took place in the Bay Area in the first three quarters of 2024 for a total volume of nearly $1.8 billion. That’s about double last year’s numbers of 30 deals and nearly $900 million for the first three quarters of 2023. The price per square foot dropped from $322 a year ago to $282 this year.

The action was largely focused on Santa Clara County, particularly Mountain View and Santa Clara, which matches national sales trends that shows attention mounting for suburban locations, as well as more movement in the tech sector, according to Peter Kolaczynski, associate director of commercial data at CommercialEdge.

Though the Bay Area was by far the biggest market in the West this year, with sales volume nearly double that of second-place Los Angeles, the numbers still “pale in comparison” to 2021, 2022 or pre-Covid, Kolaczynski explained. In full year 2019, there were 154 deals at an average price per square foot of $488 in the Bay Area for a sales volume of $8.9 billion, according to his data.

San Francisco made up all but about $1 billion of that regional volume in 2019, but the number of trades and the price per square foot has fallen dramatically in the city — from $749 per square foot over 78 deals in 2019 to $260 per square foot over 23 deals in the first three quarters of this year. Still, transaction volume is picking up in the city, even if total sales volume is still down. Last year there were just 16 deals in the first three calendar quarters.

There is evidence that prices have dropped low enough to make the city intriguing to outside buyers, even with about one in three offices still empty. While last years’ few transactions were led almost entirely by local firms, this year there have been buyers from Alaska, Dallas and Miami, as well as local partnerships.

Agents and analysts say the city still struggles with vacancies, especially in tech-heavy SoMa, but hot spots such as Mission Bay and the North Financial District have filled space more easily and often at higher rents. Citywide, San Francisco rents are still the second-highest in the country, according to Yardi, with asking rates averaging $67.32 per square foot, a 3.3 percent increase over the last 12 months. San Francisco is narrowing in on Manhattan’s lead as the most expensive office market in the country, with a difference of less than $1 per square foot.

Bay Area-wide annual asking rents are about $54, up 1.7 percent in the last 12 months, and still well above the average listing rate nationally of $33.

Clarion Partners’ Sand Hill Commons in Menlo Park has one of the highest asking rents in the country at $204 per square foot, according to the CommercialEdge report. Tenants in the two-building, Class A complex on VC mecca Sand Hill Road include banks Morgan Stanley and venture funds LFJ and Lightstone Ventures.