Comparing Office Space Costs: LA vs. San Francisco

Los Angeles and San Francisco are home to some of the largest and most dynamic office space markets on the US West Coast. However, there are important differences in the costs involved in setting up an office in these locations. In this article, we offer a comparative cost analysis of office lease costs between Los Angeles and San Francisco.

Los Angeles: The US creative capital

Being the nation’s creative capital, Los Angeles is a magnet for businesses looking for office space to carry out media, entertainment, design, and advertising activities.

In 2023, the city’s creative industries contributed nearly 15% of the state’s total economic output.

The majority of these businesses are located in downtown LA but also in exclusive hillside and waterfront locations, such as Hollywood, Silicon Beach, the Arts District, Playa Vista, and Burbank.

San Francisco: A global tech city

San Francisco’s business community is known for its strengths in tech and innovation, not only in the nearby Silicon Valley but also in the city’s financial district and SOMA, which are renowned tech powerhouses.

Despite its compact layout, San Francisco is one of the largest US office markets by square footage, offering space in a variety of office unit sizes and locations.

Trends affecting office costs in LA and San Francisco

In Los Angeles, the most notable trend is the surge in demand for flexible and coworking space, driven by a growing startup and freelancer population. The city is home to the second biggest flexible space market in the US. This had repercussions on the conventional office market, given the preference for flexible models and the need to downsize, which has led to record-high vacancies and decreasing rental rates.

In San Francisco and Silicon Valley, the high adoption of hybrid models and demand for satellite offices has caused an exodus from downtown offices, whose base rents have been dropping and becoming more affordable after being one of the most expensive office markets in the US until 2019. Despite this, in comparative terms, San Francisco office space is pricier than space in Los Angeles.

Comparative cost analysis

Let’s move on to a breakdown of the costs involved in leasing office space in Los Angeles and San Francisco.

1.    Base Rent

Los Angeles: Average listing rates across the LA metro area are $41 / sq ft for all office building classes. County-wide rates for Class A average $40 / sq ft and $30 / sq ft for Class B space. 

In downtown LA, base rent averages $46 / sq ft, although there are noticeable cost disparities between downtown sub-markets, with costs in Little Tokyo staying under $30 but exceeding $50 in the Fashion District. 

Outside of downtown LA, the priciest office spaces are in Beverly Hills, Century City, Hollywood, Miracle Mile, and El Segundo, all commanding average rates above $40 / sq ft. The most affordable offices are in Mid Cities, under $30 / sq ft.

San Francisco: Average base rent for San Francisco office space comes in at just under $70 / sq ft for all property classes and $54 / sq ft in the Bay Area. By building class, asking rates across the city are $58 for Class A offices, $46 for Class B, and $39 for Class C. In Silicon Valley, the average base rent is close to $60 / sq ft for Class A offices.

The priciest sub-markets (but still under $100 / sq ft) are Mission Bay, China Basin, the Financial District, and Yerba Buena. The most affordable office rents are in South of Market West and Potrero Hill, both around $50 / sq ft, and are also below average in Van Ness Corridor and Waterfront.

Despite recent rental rate declines, San Francisco remains one of the priciest US markets for large headcount and square footage requirements, and it remains oriented to large corporations.

2.    Utilities and Maintenance

The compounding factors affecting operating expenses, like office utilities and maintenance, range from office unit size, lease type, and occupancy numbers to major weather differences between both cities.

In Los Angeles, utility costs for the average small business are around $4.60 / sq ft. On the other hand, the Bay Area generally experiences higher utility costs, in particular electricity, which costs more than 67% than the national average.

3.    Taxes and Concessions

Additional costs related to property taxes may be passed to office occupiers, putting additional pressure on budgets. Although there has been a sharp decline in commercial property values in both cities due to work-form-home arrangements, these are more noticeable in San Francisco, which has led to a drop in commercial tax rates.

Concessions and incentives, such as the Tenant Improvement Allowance, can also impact overall lease costs. In Los Angeles, TIA is between $60 and 80 / sq ft, whereas in San Francisco, the average is noticeably lower at $32 / sq ft.

Rent abatements on long-term leases average 10 months in LA vs. 3 months in San Francisco.

Conclusion

Although Los Angeles generally offers more affordable office rental rates, San Francisco provides unparalleled access to a tech and innovation-oriented ecosystem. Businesses must consider their specific needs and growth plans when deciding between these two Californian office markets, to make decisions aligned with their goals and budget requirements.

Take a look at the office space available in Los Angeles and San Francisco.

With a market size of nearly $900bn, the United States has one of the world’s largest commercial real estate markets, coupled with some of the most desirable business locations to match. This post serves as the first part of our examination into the US market’s performance based on data from Q4 2020 and Q1 2021.

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The city of San Francisco is one of the top business hubs in the Americas. The local business community is among the most vibrant and successful at global level, partly due to the huge pool of talent available in the city and its surrounding areas. A large number of Fortune 500 companies are based in the area, and business opportunities exist for enterprises operating in a wide range of sectors, from aerospace to health care and including electronics, consumer goods, retail, and telecommunications.

The undeniable appeal of San Francisco as a business location has attracted hundreds of prospective entrepreneurs to the area. If you are considering setting up a business in San Francisco, take a look at our detailed guide to commercial property in this thriving Californian city.

Key Trends in the San Francisco CRE Market
For the past two years, the local commercial property market in San Francisco has shown a variety of healthy indicators.
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As tech companies offer higher pay for developers, ten cities stand out in the U.S. as the highest paying for IT jobs. San Jose, San Francisco and New York offer the highest salaries. Those who are searching for the highest paying IT jobs obviously need to head west. Statistics from the recruiting company CyberCoders points out that the average salaries in San Jose and San Francisco average $14,000 more than in third ranked New York City.

The top 10 list does contain cities scattered throughout the U.S. where lucrative jobs can be found. Major cities like Boston, Washington D.C., Dallas and Chicago are included on the list. The greatest increase in salaries has come in mobile development positions. However, IT salaries have gone up across the board in the last year. Individuals who acquire multiplatform skills and are able to design and code within the constantly changing world of mobile applications become the highest paid workers.

The cities that rank highest in pay for IT jobs in high-range, mid-range and low-range salaries are:
1. San Jose, CA
2. San Francisco, CA
3. New York, NY
4. Washington, D.C.
5. Boston, MA
6. Los Angeles, CA
7. Brooklyn, NY
8. Philadelphia, PA
9. Chicago, IL
10. Dallas, TX

The Roche Group is pushing back the frontiers of healthcare in 150 countries, employing about 80,000 workers. It has become one of the largest research-based healthcare groups. Genentech, a subsidiary, has led the biotech industry for over 30 years. They use human genetic information to develop specialized medicines for life-threatening diseases. The headquarters for Roche pharmaceutical operations are located in the U.S. Their philosophy is that the employees are their most important asset and they are dedicated to maintaining a great work place along with providing the best salaries for IT workers. Their CRM Techs provide expert technical information for Genentech’s Commercial Operations. They are responsible for maintaining project work, enhancements, and problem solutions. They work with onsite contractors and a Poland-based development team. These workers must be familiar with a variety of databases, with a strong technical foundation that includes advanced structured programming. Salary compensation for these positions is among the highest in the field.

CompuTech, located in Clarkstown, NY offers Desktop Support Tech positions with a world renowned computer manufacturing company. These are contract positions requiring backgrounds 5 years’ experience in both HP hardware and software, Windows XP and Windows 7 maintenance. Salaries are commensurate with experience and skill levels.

Similar positions may be found in any of the cities listed above. Depending on the applicant’s skills and training, and where he wants to work, high-paying IT jobs are available throughout the country.

For visitors who want to stray from the beaten path while visiting San Francisco, here are 10 activities to consider:

1. The all American game baseball is alive and well in San Francisco, California, at the AT&T Ball Park. Catch a game at one of the best baseball stadiums with a classic feel and outstanding views.

2. Not exactly in San Francisco, but 20 minutes north across the Golden Gate Bridge are ancient giant trees that are part of the Coastal Redwood Forests. They provide a relaxing walk where visitors can be inspired by the centuries old trees amid overwhelming pine scent.

3. China Town should be on every tourist’s itinerary. A visit to this area can be as structured or adventurous as each individual desires. Dim sum tea houses make great choices for a lunch stop or to grab a meal to go.

4. At the Northwestern tip of the city is Lincoln Park and one of the most scenic trail walks available anywhere. Starting from the Sutro Bath Ruins and the Cliff House walkers move along Land’s End Trail. It provides a fantastic view of Golden Gate Bridge and the bay, ending near Sea Cliff and China Beach Park.

5. Market Street is a great place to shop or just watch the locals do their shopping. The street leads straight to the Ferry Building and the Saturday outdoor farmer’s market. Many of the shops and restaurants spread into the outdoors as well along the water’s edge and the city’s piers.

6. Golden Gate Park hosts numerous attractions including the Japanese Tea Garden, Academy of Sciences, de Young Museum, and Stow Lake. Events are scheduled there throughout the year. It also provides miles of paved trails to bike or walk.

7. Visit the USS Pampanito at Pier 45, Fisherman’s Wharf. This World War II Balao Class Fleet Submarine has become a memorial and museum. Educational day and overnight programs are available for children throughout the year.

8. The Exploratorium houses ongoing exploration of art, science and human perception. It has a vast collection of interactive exhibits, web features, supervised programs, activities and events.

9. The Marrakech Magic Theater provides an unforgettable show filled with laughter and intriguing feats of magic for the whole family.

10. The Walt Disney History Museum displays many artifacts from Walt’s personal life from birth to death and all the amazing things he accomplished that continue to entertain visitors today.