San Francisco area real estate is bearing the brunt of the dot-com bust as the city's commercial rents plunge and sky-high housing prices begin to level off - or in some cases, drop.
Commercial real estate is showing the most weakness, with San Francisco office rents falling by more than a third and vacancy rates reaching their highest levels since a recession gripped the region in the early 1990s, according to a new survey by Grubb & Ellis.
"San Francisco has never seen this kind of retrenchment," Colin Yasukochi, market research director for Grubb & Ellis' San Francisco office, said. "We've had soft real estate markets in the past, but never had it change so fast."
As dot-com companies vanished and vast floors of new office space came on the market, San Francisco's pool of available office space grew by 2.4 million square feet during the first half of 2001, and more is expected.
In the city's South of Market area, which saw vast tracts of warehouse space transformed into offices for start-ups and dot-coms, rents for the most expensive spaces fell by more than 44 percent while those for second-tier spaces fell by two-thirds, Grubb & Ellis said.
Housing prices were still relatively strong, but were likely to be past the peak they reached during the dot-com boom, according to market analysts.
