San Francisco Office Bldg Selling At A Discount
USA – A 23-storey office building at 455 Market Street in downtown San Francisco has been put up for sale at an asking price of about US$280 million. That translates to US$750 psf, down from US$900 psf the commercial property would have commanded if it was sold prior to the COVID-19 pandemic, reported the San Francisco Business Times last week.
Notably, marketing agent Eastdil Secured has been appointed by the landlord UBS Realty Investors, which has owned the commercial property for about 30 years since it was completed in 1987.
Located at Market and First streets in San Francisco’s financial district, the 374,200 sq ff office building is 80 percent occupied. Designed by Daniel, Mann, Johnson, & Mendenhall, it represents the first major multitenant office tower launched for sale since the onset of the virus outbreak.
Based on the offering memorandum obtained by the news outlet, the asset counts Hinge Health Inc. among its biggest tenants, and 193,000 sq ft of leases and renewals started or were in progress at 455 Market Street in the last two years.
“I think that for multitenant buildings, Class A-type properties, we’re going to get a new watermark— albeit probably a reflection of where investment appetite is at this very given moment for office,” said Alexander Quinn, Research Director for Northern California at property consultancy Jones Lang LaSalle (JLL).
“We’re expecting that pricing will be on the lower end, and it’ll reset the pricing for a portion of the market, and I think a lot of people might overreact to the price.”
According to JLL data, nearly 22 percent of San Francisco’s office stock of 82 million sq ft presently lie vacant. Despite this, huge commercial properties have entered the market in the last two years, and some listings have led to record-breaking sales.
For instance, the new 750,000 sq ft office complex at 1800 Owens Street was divested for $1.08 billion in March 2021 and set a new record in psf price. Previously, it was fully leased by file sharing company Dropbox and the new owner has agreed to terminate a part of Dropbox’s lease and rebranded the office tower to cater to the life science sector.
Last September, the 1.6 million sq ft PG&E headquarters in downtown San Francisco was involved in a US$800 million sale to developer Hines, which plans to redevelop the commercial property.
“I just don’t think they’re getting to the price guidance that they would like, and when there’s a lot of portfolio assets trying to reverse out of commodity space office and into other uses, you just don’t have as big of a buyer pool as you traditionally would,” Quinn added, referring to 455 Market Street.