At a time when the value of downtown office and hotel property in San Francisco is plummeting as vacancies persist, Related California is making a tall wager that the combination of a luxury hotel and "bespoke" office tower can pencil out a block down the street from the Transamerica Pyramid.
The firm won an entitlement in 2021 to put a 19-story mixed-use tower including a hotel, 34K SF of co-working space and a fitness club above a reconstructed, city-owned fire station at 530 Sansome Street.
Now, as office vacancy rate in San Francisco is hovering around 37%, Related California has filed an application to dramatically increase the space at the project on the edge of the city's Financial District, the San Francisco Chronicle reported.
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According to the application, Related California wants to stack 24 floors of offices, encompassing 375K SF, on top of a 200-room luxury hotel that would be spread across 11 floors towards the base of a 41-story, 575-foot tower.
The developer is asking the city's permission to raze two-story Fire Station 13, which dates back to the 1970s, and replace it with the new tower. A $40M replacement fire station would stand alone next to the property on an adjacent parcel at 447 Battery Street, which Related California has inked a deal to purchase out of foreclosure.
The offices and hotel in the tower at 530 Sansome would be separated by an amenity floor. The two floors above the tower's ground-floor lobby will house a restaurant and conference space.
According to the report, Related California is not banking on a quick recovery for the San Francisco office sector or a sudden change of heart from tech conferences that have pulled out of dates at the Moscone Center.
Matt Witte, a principal of Related California, told the newspaper the project is aiming for the sweet spot of a flight to quality that has spurred demand for spaces that command impressive views. He valued the expanded Sansome development at $600M.
"The office and hotel markets are not homogeneous," Witte told the Chronicle, explaining that the office space at 530 Sansome is being designed for tenants who have an interest in "smaller floor plates with views."
The new tower will taper towards the top, providing floor plates ranging from 18K SF to 9K SF—a popular size among VC companies that are flocking to the Jackson Square area searching for the most attractive amenities.
The target audience for the luxury hotel is not conventional businesses, Witte said. "This is not a hotel that is going to have 100K SF of ballrooms," he said. "This is a very particular boutique hotel, primarily for tourist and business clientele, in a part of the city that hasn't had a hotel built in many, many years."
To build the new tower, Related will need the city to approve a variance for the neighborhood's 200-foot height limit.
Mayor London Breed has expressed support for the project.
"While the doom loopers sit on the sidelines desperately clinging to their narrative about our great city, we have people investing in our future and working every day to build a stronger, more resilient San Francisco," Jeff Cretan, spokesperson for Mayor Breed, told the Chronicle.
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