Market Overview A quarterly publication of the office market by The Axiant Group 4th Quarter 2020

numbers by a substantial margin adding almost 1.8 million Mayor ’s preemptive shutdown order square feet of sublease space in the downtown financial core brought San Francisco to a standstill and just under 3 million square feet citywide. Sublease asking Mayor London Breed’s December 6th order reversed any rates continue to decline. This would typically put more increases in activity seen at the beginning of the fourth pressure on direct rental rates to be competitive; however, quarter; sublease space in San Francisco has continued to rental rates have not decreased compared to subleasing rates. increase, with almost three million square feet added in the Leasing in the direct markets has not seen enough activity to 4th quarter. show a commensurate drop in rates. When the market opens up again, we will see a significant rental rate adjustment. Sublease Space Continues To Increase Fourth quarter vacancy rates continued to soar upward, Life Science, Lab Space In Demand increasing from an adjusted 9.7% in the 3rd quarter to 11.4% The only commercial space that has not been upset by the in the 4th quarter. Gross leasing dropped dramatically from pandemic is the life science market. Life science demand for the previous quarter going from 807,970 square feet in the space has intensified, as 3rd quarter to 318,606 square feet in the 4th quarter. Net companies race to find absorption was negative in the 4th quarter at 1,007,570 a cure for Covid-19. square feet, compared to the 3rd quarter negative absorption This quarter’s only of 807,970 square feet. significant transaction in the market was a Average asking rental rates for Class A space were $74.46 life sciences sublease square foot in the 4th quarter compared to $79.79 in the 3rd completed by Vir quarter, a decrease of 7.2%. The average rental rates for Class B Biotechnology at 1800 financial core space were $62.91 in the 4th quarter compared 1800 OWENS STREET Owens Street. to $63.92 in SAN FRANCISCO SOMA SAN FRANCISCO FINANCIAL CORE The company is testing an antibody drug, which could be Class A Rents Class B Rents Vacancy Class A Rents Class B Rents Vacancy the 3rd quarter, 100 12 100 13 representing a used on patients who have already contracted Covid-19. They slight drop in subleased 133,000 square feet from Dropbox. The building is 80 80 10 11 rental rates. Class uniquely constructed to accommodate both lab and office space use. The space has high ceilings and reinforced floors

60 % Vacancy 60 % Vacancy B absorption 8 9 was negative to allow significantly higher load than standard office space. $ Rental Rate 40 $ Rental Rate 40 at -327,922 in In addition, electrical power has been upgraded, essential for

6 7 the 4th quarter, lab use. The starting rent is $47.44 with 3% annual increases. 20 20 representing a There are also rent abatements throughout the lease term to allow for tenant improvements, as the space is unoccupied 0 4 0 5 decrease from Q120 Q220 Q320 Q420 Q120 Q220 Q320 Q420 the 3rd quarter, and in shell condition. Vir Biotechnology will have access to MARIN -466,024 square feet. South of Market (SOMA) vacancy rates Dropbox’s initial $10+ million tenant improvement allowance. Vacancy Central South Marin Rents A&B Central Rents A&B Vacancy South continued to increase, moving from 9.9% in the 3rd quarter DropBox signed their original deal in the 4th quarter of 2017, 60 to 12.5% in the 4th quarter. leasing the entire project, totaling 750,000 square feet. At the 18 50 time, this was the largest lease ever to occur in San Francisco. Sublease Space Saturates the Market Dropbox takes a significant economic hit on the sublease as 40 16 % Vacancy Record amounts of sublease space came on the market in the their current rental rate is probably somewhere in the $80 30 3rd quarter at just over two million square feet, an amount per square foot range. (cont.) $ Rental Rate 14 not seen since 2003. The fourth quarter surpassed those 20

10 12 Three , Suite P-3 | San Francisco, CA 94111 0 www.axiantgroup.com Q120 Q220 Q320 Q420

OAKLAND CBD Class A Rents Class B Rents Vacancy 80 26

70

60 22

50 % Vacancy 40 18 $ Rental Rate 30

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0 10 Q120 Q220 Q320 Q420

PENINSULA Class A Rents Class B Rents Vacancy 80 14

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50 % Vacancy 40 10 $ Rental Rate 30

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0 6 Q120 Q220 Q320 Q420 SAN FRANCISCO MARKET OVERVIEW 4th Quarter 2020

SAN FRANCISCO SOMA What Can SANWe FRANCISCO Expect? FINANCIAL CORE Class A Rents Class B Rents Vacancy Class A Rents Class B Rents Vacancy 100 12 On a more favorable100 note, many feel that the majority13 of available sublease space has already been put on the market and the numbers have stabilized. If 80 80 10 the vaccines are distributed rapidly and prove effective,11 most are expecting the market to regain some normalcy by the end of the second quarter. Could this

60 % Vacancy 60 % Vacancy 8 mean going back to work in the office? Stay safe and 9 be well! $ Rental Rate 40 $ Rental Rate 40

6 7 20 20 Where’s the Space? 0 4 0 5 Q120 Q220 Q320 Q420 Submarket DirectQ120 SF VacancyQ220 Q320 Sublet Q420SF Vacancy Total SF Vacancy MARIN (direct) (sublet) (Total) Vacancy Central South Marin Rents A&B Central Rents A&B Vacancy South Top 10 Build. 461,739 3.80% 427,947 3.50% 889,686 7.20% 60 Fin. Dist A 3,341,994 6.30% 1,673,130 3.60% 5,171,274 10.70% 18 50 Fin Dist. B 1,205,897 9.40% 574,170 4.50% 1,780,067 13.90%

40 SOMA A 262,008 5.70% 247,556 5.40% 509,564 11.20% 16 % Vacancy SOMA B 865,861 7.70% 606,018 5.40% 1,471,879 13.00% 30

$ Rental Rate 14 20 Large Tenants in the Market 10 Most large tenants have postponed major decisions on leasing space at this time. 12

0 Q120 Q220 Q320 Q420 Major Leases Completed in the Fourth Quarter OAKLAND CBD Tenant Sq. Ft. Address Class A Rents Class B Rents Vacancy 80 26 Vir Biotechnology** 133,896 1800 Owens Street

70 Goldman Sachs* 90,000

60 22 Latice 39,786 360 Spear Street

50 On Lok** 17,898 % Vacancy 40 18 Clark Hill 15,104 505 $ Rental Rate 30 Augmedix** 12,936 111 Sutter Street

20 14 Clearview Health Partners** 12,109 575 Market Street 10 *Renewal **Sublease ***Expansion ***Oakland lease 0 10 Q120 Q220 Q320 Q420

PENINSULA Class A Rents Class B Rents Vacancy 14 80 The Axiant Group Can Help You 70 Do you want information about rents and space available in your 12 60 building? Are you interested in subleasing or terminating your 50 % Vacancy lease? Is your lease expiring in the next three years? 40 10 Contact The Axiant Group. We have handled transactions from $ Rental Rate 30 1,000 to 1,000,000 sq.ft. in the Bay Area and throughout the 20 8 U.S. The average tenure of our brokers is over 20 years. We 10 have handled assignments for clients including Chevron U.S.A., John Abel – Principal 0 6 Coblentz, Patch, Duffy & Bass, Oracle Corporation, PG&E, Sutro Q120 Q220 Q320 Q420 T 415.374.2103 & Company, Zurich Scudder Investments, Charles Schwab, Texas [email protected] Pacific Group, Club One, Moss Adams, and many others. License #00884176

Three Embarcadero Center, Suite P-3 | San Francisco, CA 94111 www.axiantgroup.com