Venture capitalists continue to place their bets in the rapidly growing local tech economy. During Q3 2014, San Francisco accounted for 15.0 percent of the top 10 high-tech VC backed deals nationally. VC funding dropped since last quarter, which was expected due to the $1.2B Uber “mega” investment. Silicon Valley VC firms have begun to establish locations in the city, trading the prestige of a Sand Hill Road address for access to San Francisco’s hot start-up economy.
San Francisco’s thriving tech ecosystem is driving demand for office space and 39.4 percent of active tenant requirements are tech-related companies. San Francisco’s high cost of living could prove onerous for tech companies as they search for top talent. However, the amenity base and access to capital continues to attract companies from other markets, contributing to leasing activity that is surpassing dot.com levels. VC outlook in the current cycle is very positive and investment in new innovation will continue to grow while recently funded startups look to expand, leading to additional demand for office space going forward.