San Francisco Industrial Market Report
Market Overview
San Francisco stands as a beacon of technology and innovation. With corporate giants like Apple, Alphabet, and Meta calling this region home, San Francisco and San Jose boast unrivaled rates of economic expansion among metropolitan areas nationwide, fueling spikes in wages and household income growth. Speculative development has been a prominent feature in San Francisco’s industrial landscape, particularly evident in the downtown area and surrounding regions.
Speculative development has been a prominent feature in San Francisco’s industrial landscape, particularly evident in the downtown area and surrounding regions.
Market Performance
San Francisco has shown some of the highest rent levels for industrial properties in the nation, reaching approximately double the national average, with an average asking rate of $27.00 per square foot. The scarcity of space and competition from alternative land uses have limited large-scale industrial developments, resulting in sluggish rent growth, especially evident in flex properties, which saw only a 0.4% increase in asking rents over the past year. Despite a surge in flex vacancy, which escalated by 6.4% over the last 12 months to reach 17.7% in Q1 2024, logistics space vacancy has remained stable at its long-term average of 5.8%, contributing to an overall market vacancy rate of 9.6%.
San Francisco’s industrial market is experiencing robust construction activity, with approximately five million square feet of space currently under development, primarily focused on flex buildings catering to the life science industry’s research and development needs. Investment demand in the market has slowed in recent months, with only 74 transactions closing in the past year, mostly involving smaller industrial properties, with an average transaction price of $420 per square foot.
San Francisco by the Numbers Last 12 Months | Source: CoStar Group
- Vacancy Rate: 9.6%
- Rent Growth: 1.1%
- Deliveries SF: 1.2M
- Absorption SF: 1.9M
- Sales Volume: $351M
