Office Rents Plunge in San Francisco's Financial District
Average asking rent is $62/SF as another office tower trades for steep discount.
The cliff dive in valuations of San Francisco’s office buildings as record vacancy rates continue is having an impact on what has been called the “premier business address” in the Financial District.
Several towers on California Street have traded at fire sale prices—and now office rents are plunging as well.
The average asking rent for offices on California Street is $62 per SF, down almost a third from $90 per SF in 2020, according to data from Cushman & Wakefield reported by the San Francisco Standard.
The latest downtown office tower to trade at a hefty discount is 300 California Street, which has been acquired by Redco and its partner, GCI General Contractors for $28.5M, or about $240 per SF, from NYC-based Lefrak, who acquired the building for $58M in 2014, the San Francisco Business Times reported.
GCI will move its headquarters from 875 Battery Street to the Fifth Floor of 300 California Street, the report said.
Post-pandemic transaction prices for downtown office properties in San Francisco have established a range of between $200 and $300 per square foot, bargains that are drawing local investors betting on a recovery. The 300K SF tower at 350 California Avenue was acquired by SKS Partners and the Swig Co. last year at about $200 per SF.
Peninsula Land & Capital, a developer mainly based in South Bay, entered the San Francisco office market last summer, buying 550 California Street for about $43M, half of what the building was worth two decades ago, the Standard reported.
According to Cushman & Wakefield data, there are 27 office towers encompassing more than 8M SF lining the California Street corridor. About 33% of California Street’s offices are currently vacant, the report said.
The rental dynamic in the Financial District is changing as asking rents come down after buyers acquire premier real estate at discounted prices and pass those saving on to tenants who would have been priced out of the business corridor before the pandemic, the Standard reported.
Instead of tech companies looking for large spaces, prospective tenants from a variety of industries, including professional services, hospitality, and biopharmaceuticals, are coming in the market and new tenants are gravitating to small- to medium-sized footprints, the report said.