San Francisco Skyscraper Values Soar as Tech Lifts RentsNeil Callanan
Offices on the highest floors of skyscrapers in San Francisco and New York soared in value since March, boosted by growing technology and energy businesses, Knight Frank LLP said.
The upper floors of office towers, which command the highest rent, are valued at $2,260 a square foot in San Francisco, a gain of more than 60 percent from March, according to an index compiled by the London-based property broker. In Manhattan, values have climbed 25 percent to $2,980. At the same time, slowing Chinese growth caused prices to fall in Singapore and Hong Kong, though the latter remains the most expensive at $6,330, Knight Frank said in a report today.
“The U.S. is proving to be the comeback kid, boosted by new technology firms and shale gas,” James Roberts, the firm’s head of commercial research, said by e-mail. “Growth has been fastest in the city with the most tech exposure, namely San Francisco.”
San Francisco moved to fifth in the skyscraper value rankings from ninth in March, the biggest increase among buildings of more than 20 stories in the 15 cities included in the survey, the broker said. Almost three-quarters of the tenant deals in the year through June were signed by technology firms such as social media and mobile-applications startups, CBRE Group Inc. said in August.
San Francisco Rentals
Salesforce.com Inc., the biggest maker of customer-management software, agreed in April to lease more than half of Boston Properties Inc.’s tower at 415 Mission St., slated to be the city’s tallest when it’s completed in 2017. Vornado Realty Trust is seeking more technology tenants after signing a lease with Microsoft Corp. for 555 California Street, once Bank of America Corp.’s world headquarters.
Declines in Hong Kong and Singapore reflect “more challenging times in the Asia Pacific economy, which is adapting to a world where China’s economy will grow at a slower pace,” Roberts said. Rents in Hong Kong are starting to rise again after falling last year, according to the Knight Frank report. Upper-floor office values declined by about $100 a square foot in the city since March.
Tokyo ranked second in the index, followed by New York and London, the world’s most expensive city to employ staff, according to Savills Plc. Singapore slipped to sixth from fourth after values fell almost 10 percent to $2,000 a square foot, excluding currency adjustments, according to data compiled by Knight Frank.
The broker’s Global Cities Index, which tracks prime office rents in the 15 cities, is forecast to grow about 20 percent over the next five years. The best performer is expected to be San Francisco with a 36.2 percent increase, followed by Singapore with a gain of more than 22 percent, the most in the Asia Pacific region. Madrid will lead Europe’s major cities with a 28.7 percent gain, the broker estimated.
Mumbai was the top-ranking city for prime office yields, a combination of rent and changes in value, at 10.25 percent for this year. Hong Kong offered the lowest yields at 2.9 percent, according to the data.