Credit Crunch Descends on San Francisco Office
- Jun 01, 2008
Like the office sectors elsewhere, San Francisco’s market has seen damage to commercial real estate investment from the credit crunch. While owners of top office properties may have sold their assets last year to take advantage of low cap rates, lower prices are deterring them from taking the same action now, according to Chris Economou, investment associate for Marcus & Millichap Real Estate Investment Services Inc. “If you have a quality asset that is 100 percent leased, you’re not necessarily dipping your toe in the water today,” he said.Indeed, for those properties that do trade, buyers are receiving discounts of as much as 15 percent below last year’s levels, according to Ken Perry, chief investment officer for The Swig Co., which owns several local office buildings.According to Economou, those that are seeking acquisition opportunities are focusing on core office properties. “Anytime there is hesitancy, buyers look to quality product,” he said. “There is a flight to quality, a flight to top locations.”Overall, though, the San Francisco office market is still fundamentally strong, he emphasized. He expects more tenant activity in the second half of the year, during which time he also predicts that cap rates will level off. “We’re going to see a pickup as businesses regain confidence.”For more on San Francisco’s office market, see the June 2008 issue of CPN or search this site for key words “From Downfall to Saving Grace” in quotation marks.