For Better or Worse, Tech Dominates Norcal’s Office Sector

Jean Ko, TRI Commercial/CORFAC International


San Francisco is a veritable boom town that has already surpassed the market roar of 1999. It can even conceivably be compared to 1849, when gold was discovered 100 miles east. In fact, this year is so utterly off the charts that most of us in the commercial real estate industry have never seen an upcycle like this in our entire careers.

Witness the fact that through the first three quarters of 2014, San Francisco’s gross office absorption reached 7.6 million square feet. Net absorption in this same period was 2.4 million square feet. This compares with 1999, the record year, when gross absorption was 7.4 million square feet – and that was for the entire year! It is quite possible we’ll hit 10 million square feet of gross absorption by the time 2014 closes out. Incidentally, net absorption for 1999 was “only” 526,000 square feet.

Not surprisingly, three out of the four biggest leases in the third quarter were completed by tech companies. The tech frenzy in San Francisco has been well documented. Most of the Silicon Valley companies want, or need, to have a presence in the city. The trend is employment-driven. Young techies don’t want to commute to the suburbs, and there are plenty of jobs.

San Francisco added 1.11 million new jobs between August 2007 and August 2014 – a 10.5 percent increase in the employmented base here, according to Chris Thornberg, founding principal of Beacon Economics. The city’s employment gains are greater than all other California cities. They also rank among the highest, if not the highest, in the U.S. during the recession’s recovery.

This makes now an exciting time to be in San Francisco, but it comes with the risk that our local and regional economy is overly dependent on sustainable growth by technology companies.

For a little perspective, our CORFAC International colleagues from London recently paid TRI a visit. Farebrother/CORFAC International told us that while tech is also hot in the U.K.’s capital, it accounts for a reasonably healthy 15 percent to 20 percent of leasing activity in London. San Francisco’s leasing activity is 65 percent tech-driven or more.

When rents used to get out of hand during upcycles, companies would typically flee to Oakland and other points in the East Bay. Not tech companies in this cycle. We’ve created a new submarket to absorb some of the growth: Mid-Market, where Twitter is headquartered.

Composed of some 3.5 million square feet, no one would have located their businesses there five or six years ago. Nowadays, if space is tight in the historic tech center of SOMA (South of Market), tech companies will take space in traditional office properties in the Financial Center. They will simply make their interiors as creative as possible by gutting drop ceilings, increasing ceiling heights and exposing concrete and HVAC ducts.

By Jean Ko, Senior Vice President of TRI Commercial/CORFAC International in San Francisco. This article originally appeared in the November 2014 edition of Western Real Estate Business magazine.

– See more at:

TRI Commercial San Francisco Team gets a first-hand look at the Transbay Terminal development project

Recently TRI Commercial San Francisco received a first-hand look at the construction progress of the Transbay Transit Center Project (TTC). 

The tour, provided by the Transbay Joint Powers Authority and Turner Construction management, began with a video presentation providing an overview of the project. Afterward, the construction management team provided a guided tour of the construction site to 15 TRI agents and their respective clients.”Desktop

Update: TRI Team Gets 500,000-SF Mgmt Assignment


“Rocklin and Roseville have benefitted more than any other Sacramento submarket this year”, says Wirt

SACRAMENTO—TRI Commercial/CORFAC International president Tom Martindale, SIOR, recently revealed that John Gallagher, CCIM, CPM and managing director with the firm, led the TRI team that won the 531,273-square-foot commercial property management assignment in the Sacramento suburban community of Rancho Cordova that includes 10 separate properties under one ownership group.

The property owner is Karlin Cap Center LLC and the building addresses for the offices are: 11000, 11010, 11020, 11030, 11040, 11050, 11060, 11070, 11080, 11090 on White Rock Rd., Rancho Cordova, CA.

The buildings were constructed in 1984 and 1985 and the campuses are known as Cap Center II and III. Located in the Highway 50 Corridor of the state capital area, it is the largest submarket in the metro area and comprised of approximately 14 million square feet of office inventory. The submarket is predominantly occupied by large-space office users which include back office operations for several national and regional companies.

“We’re naturally proud to have won the management assignment in a competitive environment and look forward to supporting the occupants of the building as well as the owners to achieve maximum efficiency of building operations and on-going tenant satisfaction with the space they respectively occupy,” Gallagher says.

In fact, Bruce Wirt, SIOR and SVP in TRI Commercial/CORFAC International’s Roseville office, exclusively tells that Rocklin and Roseville have benefitted more than any other Sacramento submarket this year.

“We’ve had quite a bit of positive absorption in Rocklin and Roseville the first half of this year for several reasons,” Wirt says. “With the recovering economy and rental rates finally increasing, we had some classic ‘flight-to-quality’ leasing activity. Plus, many of the decision makers live in these communities and they prefer shorter work commutes,” he says.

While the Rancho Cordova/Highway 50 market hasn’t been the busiest submarket in the Sacramento Metro market this year, the Rancho submarket does offer 25,000-to-50,000-square-foot floor plates to users at competitive prices, compared with the tonier neighborhoods in Roseville and Rocklin, says Gallagher.

A few of the bigger deals in Rocklin this year, according to Wirt, are: PG&E expanding into 38,000 square feet (consolidated from several locations); Liberty Mutual taking roughtly 50,000 square feet, relocating from the Point West submarket; and Rocklin Academy leasing about 40,000 square feet (a brand new charter school); they went into a building that had been vacant since 2007.

Some of the recent Roseville deals this year he mentioned include: Rabobank expanding into 83,000 square feet, from about 40,000 square feet; Solar City leasing 55,000 square feet; and SureWest in the process of selling its 200,000-square-foot campus to Bridgeway Church.

Bryan Wirt closes an 82,688-square-foot shopping center in Sacramento

Merlone Geier Makes Shopping Center Play

By Natalie Dolce | Sacramento

“This is one of the most prominent grocery-anchored retail centers on one of the busiest intersections in Sacramento… it is definitely a great piece of real estate,” Wirt tells

SACRAMENTO—The University Village Shopping Center, located at the southeast intersection of Fair Oaks Blvd. and Howe Avenue in Sacramento has changed hands. The seller wasHowe and University LLC, a local investor that acquired the property in 2002.

Merlone Geier Partners, a San Francisco-based investment company, purchased University Village Shopping Center for an undisclosed price, which is reportedly said to be around $20 million.

TRI Commercial/CORFAC International’s Bryan Wirt was the only broker involved in the deal. The 82,688-square-foot shopping center is approximately 97% occupied with only one, 1,700-square-foot space available for lease.

“This is one of the most prominent grocery-anchored retail centers on one of the busiest intersections in Sacramento… it is definitely a great piece of real estate,” Wirt, who specializes in retail real estate investment sales, tells

Wirt adds that it was a “value-add” investment for Merlone Geier Partners and that portions of the property could be redeveloped to add more retail space.

The center, located at 27 University Ave., is anchored by Safeway in approximately 27,000 square feet. Other tenants include CVS, Citibank, Starbucks, AT&T and Bandera Restaurant.

Merlone Geier Partners is a private real estate investment company focused on the acquisition, development and redevelopment of retail and retail-driven mixed-use properties on the West Coast. Primarily focused on community and neighborhood shopping centers, the firm and its predecessor, M&H Realty Partners, has been actively investing in West Coast retail property since 1993.

Education Advocacy Group Honors C. Jean Ko in Dedication of Nepalese Library

San Francisco, CA (September 26, 2014)TRI Commercial/CORFAC International 

President Tom Martindale, SIOR, announced today that C. Jean Ko, Senior Vice President and Office Leasing Group team leader, received a unique honor from the San Francisco-based education advocacy organization Room to Read. In recognition of Mr. Ko’s ongoing support, the organization dedicated a new library in Dhading, Nepal in his name. “We are very proud of Jean Ko’s ongoing efforts in support of Room To Read and congratulate him on this remarkable tribute. At TRI Commercial, we encourage agents to commit their time and financial support to the causes they are passionate about. Through these efforts, they truly embody our corporate social responsibility,” said Tom Martindale.

San Francisco-based Room to Read is a global not-for-profit organization actively empowering education through literacy and gender equality programs throughout the developing world.  Over the past 10 years, more than 8.8 million children worldwide have benefited from Room to Read’s programs.



Written by Bill Wilson

How many times, through the years, have you heard that question?

On the business front, we are looking for clues for the timing of the next business downturn. In San Francisco, we have had four years of recovery and all signs are glowing. In the last year, the tech sector has soared 17% to 53,300 jobs. In the Central Business District of San Francisco, the direct vacancy is around 6.7%. City-wide, the direct rate is 7.2%. That’s quite a different picture than in early-2001 (at the peak of the bubble) when there were only 32,500 people in high tech.  At that time, the vacancy in the CBD was only 2%. Throughout the roaring days, the tech crowd shunned Class A, preferring Class B warehouse space South of Market for the low rates. For the last four years, during the new recovery, there is still a preference for Class B side-core buildings with high ceilings known as “creative space”.

Those converted SOMA warehouses are now mostly full, forcing a lot of tech users to rethink the necessity for “creative space”. What sets Airbnb, Linkedin, Twitter or Salesforce apart from the rest of the “tech crowd”? Do they need side-core “creative space” to do their jobs. Of course not! Out of necessity for space, the tech star, Salesforce, reversed course and concentrated on Class A in the CBD. On top of their prior space, this year they leased all of 350 Mission Street (450,000 r.s.f.) and over one-half of the former TransBay Tower at 415 Mission Street (710,000 r.s.f.). The easy walk in the CBD to BART/Muni has attracted corporations with employees who have to commute from all surrounding communities, reflecting San Francisco’s housing crisis. This places a premium on space close to major transportation facilities.

Despite the nearly 7% direct vacancy in the CBD, large users are having trouble finding spaces exceeding 100,000 r.s.f. For many of my readers, that won’t be a problem. But the earlier restriction of Proposition M could constrict the availability of new construction, sending rents higher. Prop M restricts the amount of square footage in yearly allotments to 875,000 sq.ft. Despite 5.1 million sq.ft. in unused building allotments at the end of 2013, recent market activity has sapped that figure to zero. That restricts the movement of more large corporations moving to S.F. The rent pressure will fall on the small tenants, particularly those who use less than 10,000 r.s.f. According to CoStar, in the CBD there are 240 spaces below 5,000 r.s.f. and 132 spaces in the 5,000-10,000 r.s.f. range. (Note: These don’t include sublease space.) There are choices, but not a lot!

So it looks like there will be limited space in the next two years. Use it to share in the prosperity which is presently upon us!


View Original

No Bursting This Bubble

by Terrence Jones, Senior Broker Associate

Could it be that our current, crazed market represents a paradigm shift where demand forever outpaces supply?

The owners of existing rent controlled apartment buildings in San Francisco have seen three strong years of consistently rising rents and ever-increasing property values for their buildings. And that’s great, right? According to RealPage, as of the second quarter of 2013, San Francisco has now moved into the number-one metro market position in the entire country for rent increases with a hefty 7.8% annualized rent growth. When this rent growth is combined with the rent control rules in San Francisco, owners here are in one of the few markets where a vacancy is a reason to pop the champagne cork.

The big question is, will the party stop when rents go flat—or even drop? Many have suggested we are in another dot-com-like bubble, as we saw in the early 2000’s, and that we should be prepared to feel the pain of the bubble popping. There are others who feel we may have stepped over a threshold toward an upward trend that shows no sign of stopping. This group sees a paradigm shift to a new San Francisco rental reality. They believe that rents will continue their upward trend and reach world-record levels. They feel the world has discovered that San Francisco is a great place to live and work, and there will be no turning back on rents.

Let’s look at some of what the bubble advocates have recently been suggesting about a coming end to the good times for San Francisco. Recent articles and headlines from all different kinds of publications have predicted doom for San Francisco: “Bearish Ken Rosen Growls About Tech” from the San Francisco Business Times; “Vulnerable San Francisco Ignores Growing Tech Bubble Talk” from the San Francisco Bay Guardian; and “Shades of ’99: New Data Shows the Tech Boom Is Looking More and More like a Bubble” from Business Insider.

A Tale of Two Tech Booms
Despite the gloom of the above articles, I don’t think the bubble is ready to burst. Let’s start with a simple supply and demand analysis of the market. There are effectively no plans to create rent controlled apartment units in San Francisco outside the few below-market units in the pipeline attached to new construction. We can therefore make an assumption that there will not be significant growth of supply in the market for the foreseeable future.

That takes care of supply, so what about demand? In general, rents tend to move in step with new job creation. New office leases and expansion of existing company leases are one predictor of new jobs for the city. If we look at new and expansion leases (excluding renewals) we see an interesting story.

The top-10 leases in terms of square feet leased (either new or expansion leases) for the largest square footage, as reported in the San Francisco Business Times for 2013, are as follows:

As we look at this list, it is interesting to note the depth of companies signing new leases. Gone are the days of market-share or advertising-driven dot-com companies, who dominated the market during the last bubble. Many of those companies had business models that derived 100% of their income from advertising or future revenue based on market share.

A landlord friend of mine distinctly remembered that time:

One aspect of the dot-com fiasco (in the early 2000s) was that many of the enterprises had as their primary business objective the capture of “market share.” They did not have a business model that promoted income but rather captured an ever-increasing percentage of market share. Using that business model, they paid operating expenses primarily out of capital dollars, since the revenue stream was weak or non-existent. When the capital market weakened, the enterprise failed and creditors (including landlords) were left holding the bag. The market (both commercial and residential) reacted accordingly as the demand decreased. In the long term, it was but a downward “blip” on a market that recovered. The short-term investor was vulnerable, as were businesses that expanded in the belief that the dot-com expansion would not end.

Today, of the companies in the list below, only Google gets the lion’s share of its revenue from web advertising and market share. (I am willing to bet that probably 80% of all people in this state have a free Google email account.) At the end of 2013, Google noted that 91% of their revenue was derived from advertising.
The tech boom of the early 2000’s was susceptible to the popping bubble factor more than the companies that are successful today because the new jobs at that time were mostly at companies whose sole business plan was to provide a vehicle for web advertising. (If you remember, this was the single focus of Yahoo at the time.)

If you look closer at Google’s last three years of revenue, you will notice that each year they have actually been decreasing their web advertising revenue and increasing their other revenue. Perhaps all those PhDs on the bus from San Francisco to Mountain View are helping the company evolve to a less bubble-oriented strategy as a way to help keep their jobs. There are many new initiatives at Google, like their robotics program, their extending life expectancy program, the infamous Google Glass, the Google self-driving car, Google Shopping, Google Chrome, and many other diversification plans. I am willing to bet their future plans will not rely on advertising to keep the magic bus rolling.

Outside Google, we can see significant job growth in the biotech, healthcare, financial and software sectors as well. Many of these companies, like Kaiser and Visa, are mature, long-established companies—a far cry from the start-ups we saw in the early 2000’s. If 2014’s new and expanding leases continue along this trend, we will likely see a continued increase in jobs, which will increase the demand for apartments, which will inevitably increase rents.

If we switch gears and look beyond the tangible factor of the job growth that has led to rent growth and we look at the quality of life issues that are also drawing young people to San Francisco, we see another interesting factor in our demand analysis. San Francisco has mild weather, a growing sports and food culture, and proximity to wine country and beaches. It is easy to see why companies are moving to the Bay Area. They want to be where young people—their employee base—want to live.

For me, I see the glass as half full. The long-kept secret is out and everyone knows it: San Francisco is a great place to live and work. We are in the middle of a paradigm shift where San Francisco continues to lead the world in technology, business and, yes, rents. I don’t see that ending any time soon.

Terrence Jones is a senior broker associate with TRI Commercial and specializes in the marketing and sale of investment properties. His business specialty is San Francisco rent controlled apartments. He has extensive experience with properties with special circumstances. He can be contacted at 415-786-2216 or by email at @terrenceojones

Original Article

New Agent Announcement – Jared Dong

On behalf of the Roseville & Sacramento Offices we are pleased to welcome Jared Dong to our team.

Jared Dong

Before joining TRI Commercial Jared was with CB Richard Ellis form June 2004 to October 2006. He joined Terranomics Retail Services/Cassidy Turley in October 2006 representing both Tenants and Landlords in sales and lease transactions.


Jared specializes in Landlord and Tenant representation of existing shopping centers, acquisition and disposition of single tenant and multi-tenant retail assets, as well as ground-up retail development consulting and pre-leasing.

JDong Headshot






Jared Dong

Vice President

Direct: 916.669.4561

Fax: 916.231.1362

License #01478101

New Agent Announcement – Bob Dong

On behalf of the Roseville & Sacramento Offices we are pleased to welcome Bob Dong to our team.

Bob Dong

Prior to joining TRI Commercial, Bob worked for CB Richard Ellis for over 30 years representing national and regional developers, property owners and tenants in all phases of retail property development. Most recently he was with Terranomics/Cassidy Turley as a Senior Vice President/Partner from October 2006.


Bob specializes in the assemblage of land for development, new shopping center developments, re-tenanting and renovating existing centers, tenant representation, investment property sales, and site analysis, acquisition and disposition for major accounts.






Bob Dong

Sr. Vice President

Direct: 916.669.4560

Fax: 916.231.1335

License #00581221

MacFarlane Partners Grabs Final Vacant Mid-Market Development Site

Date: Thursday, December 20, 2012,  J.K. Dineen , Reporter  –  San Francisco Business Times

MacFarlane Partners, represented by Anton Qiu and Gary Cohen of TRI Commercial/CORFAC International, has purchased the last remaining vacant lot in Mid-Market at 1125 Market Street for $7.8 million. The housing developer plans to construct a 12-story apartment building on the 13,000-square-foot former Embassy Theater site.

Full article