Saturday, July 9, 2011

The Epicenter of the Manipulated Recovery is on Fire

Near Silicon Valley, the epicenter of the Fed's manipulated recovery, office rents are soaring.

"San Francisco jumped to the No. 1 position in the country" for office real estate performance, said Colin Yasukochi, vice president of research at Jones Lang LaSalle, according to the SF Chronicle. "Technology companies are the underlying driving force in the San Francisco market. It's recovering very quickly" from the economic downturn.

He shows the city's average asking office rent at $40.06 per square foot, up from $33.71 a year ago, an increase of 19%.

Over the past four quarters, about 1.3 million square feet of space was absorbed by tenants, "the best four quarters since 2008, which was the peak of the market," Yasukochi said. While the vacancy rate overall is still a relatively high 16.2 percent, in hot neighborhoods such as South of Market, it's only 6.9 percent, he said.

CJ Bowden emails:
I run an online and mobile game business in the US. We rented an office in SF in early 2010. The landlord wants to raise our rent by 65%. Yes, you read that correctly. Oh, and we also had to pay a 1.5% payroll tax for the ‘privilege’ of doing business in SF.  They told us that the office could rent for double what we are paying. I guess we’re lucky with a mere 65% increase. Here’s what the leasing agent told us: “…Yeah, I know it's steep. The market is worlds different than last time we were out. At least they responded and will do a one year term.”  Here’s just one more example of where Bernanke’s money printing has gone.
The connected venture capitalists are making sure deal flow goes through them and it is showing up in the numbers. This will spread to other sectors of the economy, but the early stage of this recovery is all about miners and bloggers.

As far as getting an edge on price inflation, these two sectors will lead the pack.

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