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SAN FRANCISCO-Macys.com, the online division of the national retailer, is consolidating and expanding its operations at the Monadnock Building. The 10-story 190,365-sf historic office property is located at 685 Market St., adjacent to the Hearst Building and the Palace Hotel.

Macys.com signed a 10-year lease for the top three floors of the building, which total 56,500 sf, and a month-to-month lease for an additional 13,000 sf on the sixth floor. It occupied the space on the sixth floor immediately and expects to occupy the top three floors shortly after tenant improvements are complete in April.

Scott Harper of Colliers International represented the building owner, Prudential. Harper says there’s a strong possibility that Macys.com will decide to retain the sixth floor space on a permanent basis, dropping availability in the building to just 6,000 sf. Dan Cressman of Grubb & Ellis represented Macy’s. He did not return a Friday phone call seeking comment.

The negotiated lease rate was not released by the parties involved; the asking base lease rate for the space prior to negotiations was in the high $30s per sf. Given Macy’s strong credit, long-term commitment and substantial space needs, it likely received a discount as well as a tenant improvement allowance, local sources tell GlobeSt.com.

Macys.com is reportedly consolidating employees from 250 Fourth St. and from Macy’s West’s offices on O’Farrell Street. Macys.com chose 685 Market St. for its historical significance and aesthetics, its natural light, and its proximity to its Union Square retail store and offices. “It’s one of the true great historically renovated buildings in San Francisco,” Harper says.

The space it will occupy at the Monadnock Building previously housed Sonnenschein, Nath & Rosenthal, an internationally recognized law firm. Prudential was reportedly very selective about who it wanted in the building, which kept the space vacant for more than a year. During that time, lease rates rose by about 30%.

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