Hines Atlas to Buy PG&E San Francisco Headquarters for $800M
PE&G is requesting approval from the California Public Utilities Commission to distribute proceeds from the sale to PE&G customers.
Hines Atlas US has entered into an agreement to purchase PG&E’s San Francisco headquarters space for $800 million. PG&E is requesting approval from the California Public Utilities Commission to distribute between $390 million and $420 million in proceeds from the sale to PG&E customers over a five-year period with the goal of moderating rate increases. This is not expected to have an impact on the company’s 2021 equity position.
The company’s headquarters complex includes 77 Beale Street and 245 Market Street. PG&E will occupy a new, more affordable headquarters space in Oakland in the first half of 2022. The new location will consolidate the San Francisco office complex as well as two other offices at 3401 Crow Canyon Road in San Ramon and 1850 Gateway Boulevard in Concord. The change in headquarters location is a strategic move to help the firm fulfill its commitment to make changes to benefit customers long-term, including significant safety and operational investments.
In addition to affordability, the new headquarter location has a more flexible layout and a design that will better support health and safety requirements in a post-COVID-19 world. It will also mean a shorter commute time for the company’s employees, most of which live in the East Bay.
This is one of a handful of a significant sales in the San Francisco office market, which is in transition following a tough year during the pandemic. Another occurred in March when Kilroy Realty Corp. announced plans to sell it 750,000-square-foot office complex The Exchange on 16th for $1.08 billion. The firm developed the property in 2015 for a total construction cost of $585 million. In 2017, it inked a major lease deal with DropBox to occupy the entire office. The deal became the largest single class-A commercial lease transaction to ever be completed in San Francisco.
These deals could indicate a changing tide. In April, the VTS Office Demand Index indicated a near return to pre-pandemic office demand. Nationally, office demand is within 9% of pre-pandemic levels. In San Francisco the results were even better, showing demand is within 5% of pre-pandemic levels.