Q1 2021 MARKET IN MINUTES Savills Research

San Francisco sees small signs of market

KEY STATISTICS y-o-y return from shutdown, eventually leading to Q1 2020 Q1 2021 Change conditions prime for tenant opportunity Inventory 80.0 MSF 81.9 MSF A year into the COVID-19 pandemic, San Francisco remains one of the markets most Availability Rate 11.1% 23.6% impacted by disruption stemming from business restrictions and local shelter-in-place- orders. Leasing has been limited and current market pricing is difficult to establish without Asking Rental Rate $83.50 $72.39 demand to support. First-quarter leasing volume totaled 380,394 square feet (sf), and while this is well below pre-COVID levels, it is the first positive quarterly increase since Q3 Class A Asking Rental Rate $88.78 $75.70 2019 and marks a 56.6% increase quarter over quarter. Current activity stems mainly from Quarterly Leasing Activity 1.6 MSF 0.4 MSF lease expirations forcing tenants to sign new leases or renewals, however organizations do appear to be more active in re-engaging in space discussions as vaccination becomes more widespread. Sublease inventory remains at historic highs with an additional 200,000 sf listed on the market this quarter, bringing the city’s total up to 8.9 million square feet (msf). ASKING RENT TRENDS Overall Asking Rent Class A Asking Rent Current conditions will present an unprecedented opportunity for occupiers to secure space $100.00 in a once incredibly tight leasing environment as owners will soon need to compete with the tsunami of sublease space. $80.00 $75.70

$72.39 Asking rents appear to have plateaued in the short term, but are $60.00 expected to drop as landlords move away from price discovery Over the quarter, overall availability rose 340 basis points (bps) to 23.6% - more than $ / SF double what it was this time last year (11.1%). Class A availability saw a similar increase, $40.00 rising 350 bps form Q4 to 20.7%. Overall asking rents stabilized some, with just a 0.7% decrease quarter over quarter to $72.39 per square foot (psf). Class A rents saw a marginal $20.00 increase, but held essentially stay flat, ending the quarter at $75.70 psf. Overall asking rents are down 13% since the onset of the pandemic, with a 15% decline for Class A space. With $0.00 the glut of available space on the market, expect additional decline in coming quarters as Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 2021 landlords shift from a "closed market" phase into a repricing stage once tenants’ appetite AVAILABILITY TRENDS for space begins to re-emerge in full and the sublease market becomes real competition. Overall Availability Class A Availability 25.0% 23.6% Historic headquarters sale shows owners are still bullish on San 20.7% Francisco 20.0% With its tech-heavy industry profile, many speculate how the San Francisco commercial real estate landscape will look post-COVID as many large tech firms enacted more permanent 15.0% work-from-home policies and hybrid work models. There will no doubt be more flexibility in the future and space use may look different, but there is reason to believe that San Francisco 10.0% will remain a stalwart for physical tech offices in the future and investors are willing to pay premium for space attractive to tech occupiers. Home to Dropbox’s headquarters, The 5.0% Exchange on 16th sold for $1.08 billion dollars this quarter. The sale for the 750,000-sf building registered a record of $1,440 psf, even with half of the building currently listed for sublease. 0.0% Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 2021

Outlook LEASING ACTIVITY Quarterly Leasing Activity 5-Year Quarterly Average • Leasing activity ticked up this quarter, signaling the slow start 3.5 of a return to normalcy and renewed appetite among tenants 3.0

• Rent decline stalled some but is expected to decrease further 2.5 in the coming quarters as landlords shift from price discovery mode into a repricing stage with the glut of direct and 2.0 sublease space available 1.5 • Amongst the hardest hit markets in the nation, it remains to 1.0 Square feet (millions) be seen how San Francisco will weather pandemic impact, 0.5 particularly being such a public transportation centric market 0.0 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 2021 San Francisco Market in Minutes - Q1 2021

MAJOR TRANSACTIONS 56.2% 69.7% 69.7% of major transactions were of major transactions occurred in the Financial Services accounted for 69.7% renewals by square footage Financial District North submarket by of major transactions by square footage square footage

Tenant Square Feet Address Transaction Type Submarket Industry

Goldman Sachs & Co. - Global Investment 88,370 Renewal Financial District North Financial Services Research

Mission Bay/Showplace Invitae Corporation 40,000 444 De Haro Street New Pharmaceuticals Square

Varo 24,793 New Financial District North Financial Services

Shook Hardy & Bacon 15,639 New Financial District South Legal Services LLP For more information, please contact us:

Calera Capital 14,993 Renewal Financial District North Financial Services Savills 150 California Street 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] Financial District South 20.7% Jackson Square $77.31

Rincon/South Beach 21.0% Financial District North $77.05 Christophe Haeberlin Research Manager Mission Bay/Showplace Mission Bay/Showplace 22.3% $75.76 [email protected] Square Square

Financial District North 22.4% Financial District South $72.55 About Savills Inc. Savills helps organizations find the San Francisco Overall 23.6% San Francisco Overall $72.39 right solutions that ensure employee success. Sharply skilled and fiercely dedicated, the firm’s Yerba Buena 29.2% SOMA $68.35 integrated teams of consultants and brokers are experts in better real SOMA 29.5% Waterfront/North Beach $67.88 estate. With services in tenant representation, workforce and incentives strategy, workplace Waterfront/North Beach 30.4% Rincon/South Beach $67.01 strategy and occupant experience, project management, and capital markets, Savills has elevated the Union Square/Civic Center 31.7% Yerba Buena $64.14 potential of workplaces around the corner, and around the world, for Jackson Square 37.4% Union Square/Civic Center $59.30 160 years and counting.

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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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