San Francisco is home to a large commercial real estate market and real estate investors are closely monitoring the failure of Silicon Valley Bank (SVB). The bank’s failure will have widespread implications for San Francisco’s office, industrial, retail, and multi-family real estate markets, which already have high vacancy factors. City officials are also closely watching the situation, as they know that any disruption in lending activity could significantly undermine business development in the city.
The San Francisco Commercial Real Estate industry depends on access to capital and credit availability. The collapse of SVB Bank could lead to an interruption in these services (such as mortgages or another types of loans), resulting in an immediate decrease in demand for office space. Apartments are facing an over 30 percent vacancy market, and commercial rents are dropping at an alarming rate. The ultimate loser will be San Francisco residents, as property tax revenue will drastically reduce as commercial and residential properties will be reassessed at much lower values.
With SVB’s failure, San Francisco’s office, industrial, retail, and multi-family markets could see even higher vacancy rates. San Francisco businesses relying on the bank for financing will now have to scramble for alternative sources of capital to keep their doors open. This cannot be easy in an environment where lenders are tightening their lending criteria and becoming more selective in who will lend money to.
San Francisco is already facing significant economic stress due to Covid-19-related restrictions and shutdowns; adding another major financial institution failing into this equation could cause economic conditions to become much worse. San Francisco commercial real estate investors will have to take extra caution when protecting themselves from further market downturns.
City officials and other stakeholders must also be diligent when finding solutions and taking action to help San Francisco weather this storm as best as possible.
This unfolding situation could significantly impact San Francisco’s commercial real estate market. Still, only time will tell the true extent of the damage caused by the collapse of SVB Bank and how hard San Francisco’s economy will be hit. It is essential for San Francisco businesses, commercial real estate investors, city officials, and all other stakeholders involved to remain vigilant and prepared for what lies ahead in their economic journey. All eyes are now on San Francisco to see how the city will weather this storm.
Written by: Hans Hansson
Hans Hansson is the President of Starboard Commercial Real Estate. Hans has been an active broker for over 35 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email [email protected] or call him at (415) 765-6897.
