Downtown San Francisco Office Tower on Sale for 50% Off
The 20-story building is listing for $80M, nearly half off the last sale price.
It looks like the fire sale of office buildings in San Francisco will not be ending anytime soon, with a 20-story tower at 33 New Montgomery Street about to join the ranks of heavily discounted properties.
Barings, the global investment management firm, is about to begin a search for a buyer for the tower, which is across the street from the luxury Palace Hotel and is known for a distinctive five-story clock tower and spire over its Market Street entrance.
According to a report in the San Francisco Chronicle, the asking price for the 240K SF tower will be $80M, or $333 per square foot, which is nearly half off the last sale price. Newmark has been tapped to market the building.
In 2014, 33 New Montgomery was purchased by Cornerstone Real Estate Advisors, now a Barings company, for about $148M. The tower currently is about 70% occupied, the report said, with tenants including tech companies Shopify, Bitly and Stackla.
San Francisco’s office market continues to be plagued by record high vacancy rates as tech companies downsized office space to accommodate hybrid work patterns.
The vacancy rate in San Francisco’s battered office market set a new record in the fourth quarter, ticking up to 35.9%, a 2% jump from the previous quarter, according to preliminary data from CBRE, the San Francisco Business Times reported.
Negative net absorption in the office sector totaled 1.4M SF in Q4, which brings the 2023 total to a yawning deficit of 6.7M SF, the worst performance in San Francisco’s 88M SF market since the onset of the pandemic in 2020, when the city recorded negative net absorption of 9.9M SF.
As the valuations of San Francisco office towers have dropped below the amount of outstanding debt on the buildings, several office towers have traded at fire sale prices this year.
When it was first listed in 2020, the asking price for 350 California Street was $250M. In 2021, bidding on the building never exceeded $180M and the owners took it off the market. In May 2023, the 286K SF office tower was sold for about $60M, a 75% discount.
MUFG Americas sold 350 California Street to San Francisco-based developer SKS in a deal estimated at $200 to $225 per SF. When it was sold, the 22-story Financial District building was nearly empty after anchor tenant Union Bank vacated the building.
In June, Wells Fargo disclosed it is sold 550 California Street for about $45M. The bank bought the 13-story Financial District office tower in 2005 for $108M, or $304 per SF. The sale price translates to about $125 per SF.
Last 2022, JLL listed 550 California Street with a whisper price of $160M, but the building had no takers. After Wells Fargo assigned Eastdil Secured to relaunch the listing in January, the whisper price on the 63-year-old tower was slashed to $53 million.