Levi Strauss Inks 367K SF HQ Lease Renewal in San Francisco

About 18 months after it announced its intention to renew the 367K SF lease on its San Francisco headquarters, Levi Strauss & Co. finally has inked a deal for the space at 1155 Battery St.

However, the HQ renewal deal—the second-largest office lease renewal since in San Francisco since the beginning of the pandemic—isn’t completely good news for the city’s beleaguered office building owners, who have been struggling to fill persistent vacancies.

The deal came with a caveat: Levi Strauss also indicated that it plans to list 100K SF of the HQ space for sublease, according to a report in the San Francisco Business Times.

Financial terms of the company’s lease with Jamestown, which operates the building, were not disclosed,

The apparel maker, famous for its blue jeans, announced in the summer of 2021 that it would stay in the building known as Levi’s Plaza, but negotiations over the rental rate stalled and ended up in lengthy arbitration, the Times reported.

Levi Strauss had previously considered moving into a former Macy’s store building at 120 Stockton St. and add a flagship retail store and Levi’s museum at the site but changed its mind after the city planning officials objected to the plans.

San Francisco closed the third quarter with record high office vacancy after posting significant negative net absorption, following a general trend in tenant rightsizings and downsizings, but particularly in the North and South Financial Districts, according to Colliers’ Q3 office market report.

The vacancy rate approached 22%, with net absorption registering negative 1.4M SF in Q3, Colliers said. YTD, negative net absorption totals more than 3.5M SF in San Francisco.

“Effective rents ticked down compared to the previous quarter and are expected to continue to fall as landlords adjust to historically high vacancy and availability. Therefore, tenant concessions are expected to continue to increase,” Colliers said.

Net absorption in the North and South Financial Districts were negative 325,815 square feet and 797,569 square feet, respectively. Submarkets with positive net absorption included SOMA West, Mission Bay, and the Van Ness Corridor.

“Year-to-date concessions are up 14.8 percent compared to the same period last year. This hike in tenant improvement allowances and free rent have offset the minimal decreases seen in effective rents, especially in the core downtown class A segment,” Colliers reported.

Wells Fargo’s renewal of its 622K SF HQ lease at 333 Market Street is the largest lease renewal in San Francisco since the beginning of the pandemic.