Another E-Scooter Firm Seeks Subtenant as Providers Struggle With Workers at Home
Another office user is vacating their office space in San Francisco and trying to sublease. Nearly half of the available space in San Francisco is sublease vacancy, the highest amount in the city’s history and surpassing the Dot.com recession of the 2000's. The Northern Nevada office market is obviously different than that of San Francisco, and it currently sits at only 1.15% sublease vacancy, but It will be interesting to see the impact this has on local office space.
Read the full article below written by Katie Burke of CoStar News.
Another E-Scooter Firm Seeks Subtenant as Providers Struggle With Workers at Home
Lime Markets Downtown San Francisco Office Space, Boosting City's Availability
By Katie Burke
CoStar News
October 6, 2020 | 5:24 P.M.
Another e-scooter company is looking to offload its office space as the pandemic leads to steep ridership declines and mounting layoffs for the once rapidly expanding industry.
San Francisco-based scooter and bike rental company Lime is seeking a subtenant to take over its headquarters space at 85 Second St., according to marketing materials, a little more than 16 months after it moved in. The company has enlisted commercial real estate brokerage Newmark Knight Frank to market the 46,669-square-foot office, which would be available through Nov. 30, 2025.
"There is a segment of the market that is consumer- and travel-related within the tech sector that is the worst-performing right now because no one is going anywhere," said Robert Sammons, the senior director of Bay Area research for brokerage Cushman & Wakefield. "In this case, no one is working within the central business district in San Francisco and everyone is home. There is very little activity or need for that kind of transportation."
Neither Lime nor Newmark Knight Frank responded to requests for comment.
The decision to vacate space in the country's most expensive commercial real estate market reflects the depth of the struggle among providers of apps for digitally connected bikes and scooters. Consumer spending on scooter rides fell by nearly 100%, the most among all transportation options, according to a recent analysis of credit card data from the New York Times.
Layoffs.fyi, an online layoff tracker, reported in May that the scooter industry had shed more than 1,000 jobs after just a few months of coronavirus-related lockdowns across the country.
Along with Lime, Santa Monica-based scooter company Bird is trying to land a subtenant for more than 72,000 square feet at 2501 Colorado Ave. in Santa Monica, California. The Southern California startup put its space up for sublease this past July, about a year and a half after it moved in, according to CoStar data.
Uber, which has its own electric scooters in addition to its car ride-hailing services, has flooded markets across the country with sublease availability over the past year as well. The company said back in May that it would be consolidating or shutting down offices in an attempt to cut costs, a move that coincided with thousands of layoffs. It recently hired brokerage CBRE Group to market 115,995 square feet at 2550 Pacific Ave. in Deep Ellum, a neighborhood just east of downtown Dallas.
Initial Promise
The dockless electric scooters industry had quickly became a transportation phenomenon for commuters and tourists in cities from Los Angeles to Austin, Texas, over the past few years.
Advocates touted their benefits as a solution to car congestion and gaps in public transportation. Companies like Bird own fleets of micro-vehicles that can reach speeds of 15 miles per hour that the companies have typically dropped off on public sidewalks across cities in the early morning and pick up again in the evening for recharging.
Users were able to rent them through the day with an app that unlocks the scooters and bikes and charges fees for minutes of use, a flexibility that's both an advantage for riders and a potential nuisance with congested sidewalks, driveways and parking lots where they are sometimes abandoned at will.
They were easily accessible, convenient and cheaper than a typical Uber car ride, and were especially popular because riders didn’t have to worry about parking in dense, urban cities.
As recently as April 2019, Lime raised money at a $2.4 billion valuation, underscoring investors’ faith in their rising popularity.
The pandemic brought a halt to most commuting and travel and made sharing items such as scooters undesirable. Many scooter companies pulled much of their fleet from the streets as pandemic lockdowns rolled through cities.
Some companies have begun adding scooters back into some cities that have lower confirmed coronavirus cases and advocates suggest demand for scooters could grow as a preferable alternative to crowded public transportation when commuters begin returning to offices.
But the transportation-tech industry's challenges began sprouting before the pandemic, when startups such as Lime and Bird were faced with a litany of regulatory issues and a rough road to profitability. In California, for example, the state taxes scooter companies about 30 times more than it does for ride-hailing companies such as Uber or Lyft.
Offloading Space
Over the past several years, startups looked to set up their headquarters in high-priced premier markets across the country, often signing leases for above-market rates.
After months of financial challenges compounded by the pandemic and its related economic effects, however, an increasing number of those companies are looking for an exit route by putting their space up for sublease.
According to CoStar data, average annual rents in San Francisco back when Lime signed its headquarters lease in early 2019 were more than $77 a square foot, well above the neighborhood's average of about $70 per square foot at the time.
Sublease availability throughout California, but especially in San Francisco, has continued to climb throughout the past six months as companies continue to if, where and how much space they really need.
"Elevated levels of available sublease space suggest that underlying fundamentals are already weaker than the market's headline vacancy rate suggests," reads a CoStar market analytics report about the market. "Over 9.5 million square feet of sublease space is currently listed as available, which equates to roughly 5% of market inventory, and represents 40% of the market's available space."
Sammons said more than half of the available office space in San Francisco is sublease availability, and it's the highest amount in the city's history and surpassing that of the Dot.com recession in the early 2000s.
"A lot of tenants are frozen in place," Sammons said, adding that companies' extended work-from-home policies have contributed to weakening demand in the city.
"Since March we've seen a lot more space," he added. "It may not necessarily be companies that are performing poorly, it's just that people won't be back in the office anytime soon. If they don't need the office space now, why not make some money out of it in the meantime?"