Q2 2019 MARKET IN MINUTES Savills Research

Tenants active despite climbing asking rents; KEY STATISTICS y-o-y Q2 2018 Q2 2019 strong demand limits options in prime space Change Inventory 78.5 MSF 78.6 MSF

Activity in San Francisco kept pace through the first half of the year with 2.5 Availability Rate 9.7% 7.7% million square feet (msf) leased in the second quarter, bringing the mid-year total to 5.2 msf. Tenants are on the move, even among ever-increasing asking Asking Rental Rate $74.64 $79.78 rents. Asking rents for all classes increased 6.8% year over year, now at $79.78 Class A Asking Rental Rate $80.19 $85.64 per square foot (psf). Class A asking rents increased at a similar pace, also rising 6.8% over the year to $85.64 psf. Price is not deterring tenants seeking top- Quarterly Leasing Activity 2.9 MSF 2.5 MSF quality space, and availability has contracted accordingly. Overall availability dropped 200 basis points year over year to 7.7% and is even more limited in Class A space, now at 7.3% (down 140 basis points year over year). ASKING RENT TRENDS Overall Asking Rent Class A Asking Rent $100.00 Still, some tenants are pushed out of cost-prohibitive markets $85.64

Rising rents have spurred some tenants to seek opportunities outside of San $80.00 Francisco’s core to expand or relocate to more cost-conscious locations. Credit $79.78 Karma, with its headquarters located at 760 Market Street in Union Square/Civic $60.00 Center, has decided to expand operations across the Bay. It recently committed to a sizeable new location in Oakland in order to better access and attract talent $ / SF $40.00 living in the East Bay area. LendingClub is another company shifting some operations out of market, effectively reducing its footprint in the city by roughly $20.00 40.0%. Healthcare giant Kaiser Permanente, who is already Oakland’s largest $0.00 employer, recently committed to constructing a 1.6 msf campus to consolidate Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 regional locations within the non-core submarket. AVAILABILITY TRENDS Tech taking down big blocks in the core Overall Availability Class A Availability The tech industry again dominated leasing activity for the quarter, taking 15.0% down large blocks of prime space. Tech activity accounted for eight of the 10 largest leases seen, five of which were over 100,000 sf. Workplace messaging software company, Slack, signed for 208,459 sf at 45 Freemont Street in 10.0% 7.7% the Financial District South submarket. Zynga, a social game development company agreed to sell its headquarters building at 650 Townsend Street in 7.3% Mission Bay/Showplace Square to Beacon Capital Partners and lease back 5.0% 185,118 sf. Both Autodesk and Glassdoor committed to , taking 117,673 sf and 116,688 sf, respectively. 0.0% Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019

LEASING ACTIVITY Outlook Quarterly Leasing Activity 5-Year Quarterly Average 4.5 • Large blocks of contiguous space, particularly those in Class A 4.0 buildings within prime submarkets, continue to be in extremely 3.5 high demand 3.0 • Rising rents and waning availability in the city have led some 2.5 tenants to seek out-of-the-box and out-of-market options in order 2.0 to maintain company growth 1.5

• Tech companies that can pay a premium will continue to take down 1.0 whatever large blocks remain in such a limited market Square feet (millions) 0.5

0.0 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 San Francisco Market in Minutes - Q2 2019

MAJOR TRANSACTIONS 81.0% 40.5% 74.0% of major transactions were new market of major transactions occurred in Tech sector accounted for 74.0% of entrants or relocations Financial District South major transactions

Tenant Square feet Address Transaction type Submarket Industry

First Republic Bank 265,000 Relocation Financial District North Financial Services

Slack Technologies 208,459 New Location Financial District South Technology

Mission Bay/Showplace Zynga 185,118 650 Townsend Street Sale / Leaseback Technology Square

Autodesk 117,673 50 Beale Street Relocation Financial District South Technology

Glassdoor 116,688 50 Beale Street Relocation Financial District South Technology

Mission Bay/Showplace Samsara 116,037 1 De Haro Street New Location Technology Square

Workday 74,430 160 Spear Street Relocation Financial District South Technology

Sony PlayStation 69,798 303 2nd Street Relocation Rincon/South Beach Technology For more information, please contact us: DLA Piper 67,244 555 Relocation Financial District South Legal Services

OpenTable 57,194 1 Montgomery Street Renewal Financial District North Technology Savills 14th Floor Source Savills Research San Francisco, CA 94111 +1 415 421-5900

AVAILABILITY RATE COMPARISON RENTAL RATE COMPARISON ($/SF) Steve Barker San Francisco Submarkets San Francisco Submarkets Vice Chairman, Director, Branch Manager [email protected] Mission Bay/Showplace Financial District South 2.7% $85.72 Square Matt Nelson Rincon/South Beach Financial District North $82.51 5.1% Research Manager [email protected] Jackson Square 5.6% Jackson Square $80.00

Financial District South 6.6% San Francisco Overall $79.78 About Savills Inc. Savills helps organizations find the right solutions that ensure Yerba Buena 7.0% Rincon/South Beach $78.44 employee success. Sharply skilled and fiercely dedicated, the firm’s SOMA 7.5% SOMA $77.01 integrated teams of consultants and brokers are experts in better real estate. With services in tenant San Francisco Overall 7.7% Yerba Buena $74.35 representation, workforce and incentives strategy, workplace Mission Bay/Showplace strategy and occupant experience, Financial District North 8.7% $70.29 Square project management, and capital markets, Savills has elevated the Waterfront/North Beach 10.3% Union Square/Civic Center $67.14 potential of workplaces around the corner, and around the world, for Union Square/Civic Center 15.1% 160 years and counting. Waterfront/North Beach $66.06 For more information, please visit 0.0% 5.0% 10.0% 15.0% 20.0% $0.00 $30.00 $60.00 $90.00 Savills.us and follow us on LinkedIn, Twitter, Instagram and Facebook.

Unless otherwise noted, all rents quoted throughout this report are average asking gross (full service) rents per square foot. Statistics are calculated using both direct and sublease information. Current and historical availability and rent data are subject to change due to changes in inventory.

The information in this report is obtained from sources deemed reliable, but no representation is made as to the accuracy thereof. Unless otherwise noted, source for data is Savills Research.

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