Soma Ofc Q2'09 Eh

PREPARED BY DONNETTE CLARENS AND ELIZABETH HART

SOMA Office Market

415-513-2170

Submarket Update – 2nd Quarter, 2009

[email protected] – Lic #01234877 [email protected] – Lic #01499002

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Market Statistics

SOMA

10,679,148

27.33%

(110,497)

SAN FRANCISCO

83,604,019

17.45%

(455,936)

Availability

SOMA Office Market Historical Vacancy vs Asking Rates $39.00

30.00%

$37.00

28.00% 26.00%

$35.00

24.00% 22.00%

$33.00

20.00% 18.00%

$31.00

Total Available (sf)

Class A Asking Rents

Class B Asking Rents

SOMA

2,918,108

$31.60

$28.58

$27.00

SAN FRANCISCO

14,589,615

$35.49

$28.20

$25.00

$29.00

Vacancy Rate

Net Absorption (sf)

Asking Rental Rates

Total Inventory (sf)

Availability (%)

16.00% 14.00% 12.00% 1Q '08 2Q '08 3Q '08 4Q '08 1Q '09 2Q '09

Leasing Activity Trends While relatively few large transactions have been completed during the 2nd quarter, activity has picked up significantly this summer. Companies looking for economical deals can find them in buildings like 480/490 2nd working to increase their low occupancy rates and economical subleases from companies seeking to offload a greater real estate portfolio, such as Yahoo, MySpace etc. The lower end of the market continues to be in the $18 Full Service range. In contrast to these economical options, the trophy assets of SOMA (128 King, 139 Townsend etc) continue to achieve SF market premiums in the high $30s due to their low vacancy, ease of transportation to Silicon Valley and high end creative feel. Large blocks of space across SOMA continue to sit vacant, like 370 3rd (300,000 sf) and 650 Townsend (400,000sf). However, large users such as Twitter, Yelp and Zynga continue to shop the market and evaluate alternatives for their long term growth. We anticipate that within the next quarter at least one if not more of these larger tenants will secure a new location in San Francisco, which will be touted as an uptick in leasing momentum.

Asking Rents

Vacancy

480/490 2nd Street, San Francisco has completed four deals in 2009 and is eager is make more.

Tech Transactions across the Bay Area The outlook for SOMA still remains relatively strong in comparison to other SF markets due to its attractiveness to the technology community. Technology and venture capital transactions remain a lion’s share of our region’s lease transactions. Other popular locations for early stage start ups like downtown Palo Alto and downtown Mountain View boast much higher rents and lower vacancy than SOMA ,at $5.75 Full Service and $3.75 Full Service respectively. SOMA continues to be an economical location in relation to the other hot spots for tech start ups, due to the negative market impact by neighboring financial district of San Francisco. During the last quarter, Greylock made a substantial investment in the Bay Area by moving their headquarters from Boston to a new building on Sand Hill Road in Menlo Park. YCombinator, a well known incubator for early stage companies, also shut down their Boston facility in exchange for their Mountain View location and a smaller footprint on Howard Street that houses many of the Ycom companies in San Francisco. Across the Bay Area, notable tech transactions include Sony’s 282,000 renewal on 919/989 E. Hillsdale/950 Tower Lane in Foster City and EHealth Insurance Services 25k renewal on Middlefield/435 Whisman in Mountain View (they also have a pending deal at 128 King Street in San Fancisco). Webjuice Media also subleased 17k from Pay Pal in Downtown Mountain View at 303 Bryant. 139 Bryant Street, San Francisco

SUBMARKET UPDATE

PREPARED BY DONNETTE CLARENS AND ELIZABETH HART

SOMA Office Market

415-513-2170

Submarket Update – 2nd Quarter, 2009

[email protected] – Lic #01234877 [email protected] – Lic #01499002

______________________________________________________________________ Significant SOMA Lease Transactions Tenant Obscura Digital United BioSource Navasite Zynga Scribd

Square Feet 36,000 30,000 22,000 20,000 10,000

Type Direct Lease/Growth Direct Lease/Growth Renewal/Static Direct Lease/Growth Direct Lease/Growth

Location 2130 Third 303 Second Street (South Tower) 650 Townsend 444 DeHaro 539 Bryant

Forecast Continued increase in leasing velocity due to pent up demand and a soft rental market. Very high end creative spaces in SOMA continue to demand a SF market premium, but Tenants increasingly use economical sublease rents as a stocking horse in lease negotiations. Blends and extends for companies that are above market continue, particularly in the tech sector, to preserve cash and minimize burn rate.

Office Vacancy By Submarket 13.91%

444 De Haro, San Francisco, Zynga Zynga continues to expand within 444 DeHaro to accommodate its growth. They are also in the market for an 80k plus sf facility as a longer term option.

27.33%

10.99%

10.97% 9.40% 9.13% North Financial District

South Financial District

North Waterfront/Jackson Sq.

Van Ness/Civic Center

Union Square

SoMa

539 Bryant, San Francisco, Scribd Scribd relocated to SOMA from 211 Sutter Street in Union Square. Tech companies are attracted to SOMA for its creative feel and ease of transportation and amenities.

SUBMARKET UPDATE