Technology slowdown starts to bite in San Francisco’s commercial property market

San Francisco’s commercial real estate market may be foretelling a slowdown in the city’s heated technology-driven economy.

Office subleasing, an early indicator of past downturns, is at the highest level since 2010. The amount of available space from subleases in the city jumped to 1.9 million square feet last month, a 46 per cent increase from the end of the third quarter, according to a report from Cushman & Wakefield.

Twitter, Intuit and Zenefits are among tech companies putting excess space on the market.

“It’s the beginning of the change,” said Kenneth Rosen, chairman of the Fisher Centre for Real Estate and Urban Economics at the Haas School of Business at the University of California, Berkeley. “We’re very early in the correction process. It’s going to take several years to play out, and we don’t know how deep it will be.”

A five-year frenzy for San Francisco office space may be cooling as venture-capital investments decline and tech firms slow their hiring from a breakneck pace. The extra space is a warning sign that the growth rate for some companies was unsustainable, Rosen said.

Some startups took more space than they needed in the hopes of expanding later, while others are moving to less-expensive areas or shifting staff to other buildings in the city.