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Bay Area office, retail rents expected to drop due to COVID-19

Bay Area

SAN FRANCISCO, Calif. (KRON) — You can see the effect of the pandemic in a video shoot at lunchtime in downtown San Francisco — no hustle and no bustle.

Many storefronts are boarded up, or gated shut and lots of windows have for lease signs posted.

The cost of renting office and retail space is expected to get cheaper, relative to inflation over the next three years because of coronavirus. That’s according to a survey of Bay Area and southern California commercial developers conducted by the Allen Matkins/UCLA Anderson Forecast.

“When you think of a pandemic, it literally is something like a tidal wave and it comes through and it clears out a lot of stuff,” John Tipton said. “It clears out weaker stuff that was just barely hanging on and in some cases it knocks down some good things that quite frankly would’ve just been just fine but for the title wave of the pandemic.”

Chris Foley is a San Francisco-based developer who expects this downturn to play out as other boom and bust cycles have in the Bay Area.

“I’ve seen it before every time we have a major earthquake or major economic downturn people leave San Francisco, people say San Francisco is gonna die and there’s no hope. The Bay Area is a gateway coastal city it has U.C. Berkeley, it has Stanford, it has Silicon Valley and it has a tremendous amount of people that have actually grown up here,” Foley said. “And there’s a tremendous amount of intellectual capability and what’s gonna happen is something he was gonna be created and you’re gonna see new and more interesting things happen — it’s just part of the cycle.”

One of the people behind the survey I spoke to says he expects the economy will recover and ultimately the commercial real estate sector will be fine, but not without a lot of pain first. 

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