When it was first listed in 2020, the asking price for 350 California Street in Downtown San Francisco was $250M. In a sign of the times in the beleaguered city, the office tower now has been sold for about $60M.
MUFG Americas has sold the 286K SF tower at 350 California Street to San Francisco-based developer SKS in a deal estimated at $200 to $225 per SF. A Korean real estate investor is partnering on the deal, according to a report in the San Francisco Business Times.
The 22-story Financial District building is nearly empty. Union Bank, the anchor tenant at 350 California Street, has vacated the building. In 2021, bidding on the building never exceeded $180M and the owners took it off the market.
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It remains to be seen whether other building owners trying to sell towers in San Francisco will adopt the fire-sale price of 350 California Street as a new benchmark.
Last fall, Columbia Property Trust and Allianz Real Estate announced that they're selling a 33-story office tower at 333 Market Street in San Francisco's Financial District that is leased in its entirety by Wells Fargo.
In June, the bank renewed a 10-year lease for the 622K SF tower. The asking price for sale of the Market Street tower has not been disclosed. Columbia paid $395M for the tower in 2012 and now owns a majority stake in the property.
Nearly a third of the offices in San Francisco are empty, a vacancy rate that approached 30% in the first quarter of 2023.
As major tech players retreated from offices in San Francisco throughout 2022, the vacancy rate in the city grew by more than 10%; it's grown by an additional 2% since the end of last year, according to a report from CBRE.
Empty offices now encompass 27M SF in San Francisco, eight times the amount in 2019, when vacancy was 5%. Available space has risen above 34%, including the growing amount of offices listed for sublease that are not yet vacant.
The amount of office space on the market for sublease is approaching 10M SF. More than 900K SF was listed in Q1 2023, including substantial listings from Pinterest, Meta and Slack.
This week, San Francisco's Planning Commission approved an ordinance that will simplify the approval process and requirements for converting office buildings into residential units. The ordinance also removed restrictions blocking a greater variety of business and activities in Union Square and throughout downtown.
"We can create more opportunities to fill our empty buildings, whether that's to create housing or making it easier to fill office and retail space," Mayor London Breed said, in a statement. "These changes shouldn't be something that requires granting exceptions through lengthy paperwork and exhaustive public hearings. We need to make the process easier for getting our buildings active and full."
Among other changes, the legislation will also provide for alternative paths to Building and Fire Code compliance for adaptive reuse projects that would otherwise struggle to meet requirements designed for new ground-up construction projects.