KPMG Offices in Namesake San Francisco Tower Go on Market
Lease for a third of 25-story tower expires at the end of the year.
For more than 20 years, the 25-story office tower at 55 Second Street in San Francisco has been known as the KPMG building for the global accounting firm that acquired the naming rights along with its original lease as an anchor tenant.
KPMG’s current lease covers eight floors and at 125K SF is nearly a third of the space in the 380K SF tower. It will expire at the end of this year and is being marketed as available for leasing on a direct basis, according to CoStar data and a new listing obtained by the San Francisco Chronicle.
KPMG eliminated 2,700 U.S. jobs in two rounds of layoffs last year as it adjusted to hybrid work patterns. According to the newspaper report, the company was shopping for 75K SF.
The KPMG building was acquired by a joint venture of Paramount Group and Harel Insurance, which is based in Israel, in 2019. In 2019, the building was valued at about $401M, which equates to more than $1,000 per SF.
The building, which according to the Chronicle report is about 87% occupied, backs a $187M mortgage that comes due in 2026.
Last week, Paramount and Blackstone, which own approximately equal stakes in San Francisco’s One Market Plaza, secured an extension on a $975M loan backed by the 1.6M office complex.
The partners agreed to pay down an unspecified portion of the debt in exchange for the extension on the loan, which was set to mature early next month, according to a report in the San Francisco Business Times. The length of the extension was not disclosed.
One Market Plaza encompasses three office buildings at 1 Market Street along the Embarcadero, including the 27-story Steuart Tower, the 42-story Spear Tower and a six-story retail and annex space.
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 from CBRE.
Negative net absorption in the city’s office sector totaled 1.4M SF in Q4, which brought 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.
Office availability, which measures all available space whether it’s vacant or not, was nearly 39% in Q4, up from 37.5% in the third quarter.