Will reaching the Prop M cap in San Francisco increase spillover demand into other Bay Area markets?
Prop M restricts the amount of office space authorized for development to 950,000 square feet in a given year.
August 21, 2019
- Prop M restricts the amount of office space authorized for development to 950,000 square feet in a given year. Of this amount, 875,000 square feet is allocated for projects greater than 50,000 square feet. Space that is not allocated towards any projects in a given year rolls over to the next calendar year.
- As of 2019, roughly 2.9 million square feet has been approved, with only 20,000 square feet left that will roll into the subsequent year.
- Because of the cap on new office development, low vacancy and strong tenant demand, San Francisco users will have to look outside of the city for large block expansion.
- Rent premiums for BART and Caltrain proximity are already being realized in the Mid-Peninsula and Silicon Valley markets and will likely continue to escalate, as tenants look to retain and attract talent between bifurcated office geographies at these amenity-rich nodes.
- Both the Mid-Peninsula and Silicon Valley are primed to capture spillover demand from San Francisco, with a significant amount of large block availabilities and tight, yet higher vacancy rates.
Source: JLL Research