In March, Amazon leased the majority of a 36-storey building in a downtown Seattle which was constructed during the recession. This has fuelled hopes that technology growth will help raise office occupancies and rents.
In the three months prior to June, the US office market gained 3.7 million square feet of net occupied space, making it the third consecutive quarter of increases, according to Reis Inc. Their research shows that vacancies declined in more than half of 79 metropolitan areas surveyed.
In June, Chicago based coupon website operator, Groupon Inc. signed a lease for a 40,000 square foot building in Palo Alto, California. This building is more than three times the size of their current space in Silicon Valley, and is necessary to house this rapidly expanding product and the growing number of engineering staff.
Rising demand equals rising rents, especially in San Francisco where rents have increased 6% year on year.
Asking prices for rental properties in San Francisco are now $40.06 per square foot for the second quarter, a massive 19% increase on last year, and the largest advance for four years, according to Jones Lang LaSalle.
San Francisco is the top performing office market in the US, although New York, Boston and San Jose are not far behind. In New York, demand was highest from the financial services and media companies, while in the Boston area, demand was buoyed up from technology and life sciences companies.
The recovery is mainly being driven by the bigger companies who have access to credit and bank loans, and they are looking to rent space in central business districts which have easy access to amenities such as public transport and restaurants.