The market the past 2 weeks has felt as if it is a bit stuck in the mud, as business leaders try to wade through all of the information being presented to them by what is occurring in worldwide markets. Tech remains retrenched with regards to both hiring plans and office return, Venture Capitalists seem to be coming to the office in one’s and two’s and financial services groups are reaffirming their commitment to office space.
New Tenants in the Market/Rumors:
Reddit is touring for 60–70k RSF
Komodo Health out for 30–40k RSF
AnyRoad is taking 4th Floor of 505 Howard 15k
Discord is still pending at 650 Townsend. (150k +, could be a great deal for the market)
BCJ is downsizing to about half their square footage 15k ->7,400 RSF at 49 Geary.
Arden Capital renewed at 1 market
Viner Finance signed at 135 Main
The equity markets the past 2 weeks have been red and venture backed start-ups seem to be battening down the hatches regarding their capital outlays in order to minimize burn rates. Hiring at startups has slowed, with even some freezes occurring. Additionally, I am hearing chatter of transactions being pulled out of due to layoffs. On the bright side, the labor market remains relatively robust, with low unemployment and a dearth of job opportunities, and our team is tracking vacancies tick downward rapidly in co-working spaces. WeWork just announced that their desk space sales have reached the highest numbers since the beginning of the pandemic: (WeWork Article)
According to Crunchbase — Robotics investment remains hot, while the rest of the VC community seems content to wait on the sidelines for more direction from the markets. According to Crunchbase, at least 599 robotics companies are being tracked as funded in the past year through venture capital rounds alone. Climate change and biotech startups lead this past weeks rounds of funding while enterprise software solutions were harder to find, reflective of what we are seeing in growth stocks in public markets.
We just experienced a negative GDP number signaling a slowing of the economy due to tightening from the Fed, inflationary pricing, and still existent halted supply chains. Additionally, the economy is still sloshing around $5 trillion that was printed during the pandemic. Many investors have “dry powder” right now to deploy on the right deals, but their multiples on what they would expect to make on their deals has been thoroughly compressed. Sentiment from serial entrepreneurs who are old enough to have experienced the recessions of 2000 or 2008 is overwhelmingly in the “Its time to build” camp. Without necessarily pronouncing we are in a recession, we must remember that Airbnb, Netflix, Uber and Google were all started in the throes of difficult, volatile, markets.
When prices go up along with inflation at the production level, it tends to have a negative effect on general equity prices. Why? Because the cost to run a business is increased yet when there isn’t an equal or rising level of the economy to go along with it, there is a negative growth rate on revenues and earnings. As I pour through financial articles and updates, I’m seeing everything from “The sky is falling” to “The economy is still healthy in a number of key measures” to “Inflation is related to cash in the system and supply chains”. A great many fortunes have been made in bear markets.
