The former Union Bank building in the heart of San Francisco's financial district, located at 350 California Street, was auctioned off last week. The winning bid was $65 million, roughly 75 percent less on a per-square-foot basis than comparable building sales from just before the pandemic. This is devastating news for San Francisco, because it provides a new market-rate benchmark for pricing other downtown commercial building listings, and such a low price indicates that investors have an extremely negative outlook for the future of San Francisco's downtown area.
Just four years ago, you would be hard-pressed to find a major tech firm that either didn't have a presence in San Francisco or wasn't trying to create such a presence. Today, tech and other firms are abandoning the city. San Francisco's downtown vacancy rate has increased from only about 4 percent in 2019 to nearly 30 percent today.
The glut of downtown office space, combined with San Francisco's high housing costs, has led many to envision converting downtown commercial spaces into residential buildings, but not one residential development firm bid on this property. One residential development group that considered a bid was Emerald Fund, which converted a downtown office tower to apartments about ten years ago.
Emerald Fund ultimately viewed the prospect of a residential conversion as too risky due to the city's high fees and its low-income housing requirement. Presently, the city requires 23 percent of the units in a large development be set aside for low-to-moderate-income tenants, but this means that developers would need to charge a substantial premium on the market-rate units for the project to pencil out.
Tony Crossley, a San Francisco commercial broker, estimated a residential conversion cost per unit of nearly $1,000 per square foot for this property. "It doesn't make any economic sense," he said. "The math is completely upside down."
SF is just the canary in the coal mine, exacerbated by the looney leftists in city government.
Coming soon to all major cities.
New York is going to be a fuckin' blood bath.
If you have any investment exposure in commercial office space in a blue city you best be divesting yourself of it, and soon.
Just four years ago, you would be hard-pressed to find a major tech firm that either didn't have a presence in San Francisco or wasn't trying to create such a presence. Today, tech and other firms are abandoning the city. San Francisco's downtown vacancy rate has increased from only about 4 percent in 2019 to nearly 30 percent today.
The glut of downtown office space, combined with San Francisco's high housing costs, has led many to envision converting downtown commercial spaces into residential buildings, but not one residential development firm bid on this property. One residential development group that considered a bid was Emerald Fund, which converted a downtown office tower to apartments about ten years ago.
Emerald Fund ultimately viewed the prospect of a residential conversion as too risky due to the city's high fees and its low-income housing requirement. Presently, the city requires 23 percent of the units in a large development be set aside for low-to-moderate-income tenants, but this means that developers would need to charge a substantial premium on the market-rate units for the project to pencil out.
Tony Crossley, a San Francisco commercial broker, estimated a residential conversion cost per unit of nearly $1,000 per square foot for this property. "It doesn't make any economic sense," he said. "The math is completely upside down."
San Francisco Falls Further Into The Abyss As Office Values Plunge 75 Percent
The former Union Bank building in the heart of San Francisco’s financial district, located at 350 California Street, was auctioned off last week. The winning bid was $65 million, roughly 75 percent less on a per-square-foot basis than comparable building sales from just before the pandemic.
www.hoover.org
SF is just the canary in the coal mine, exacerbated by the looney leftists in city government.
Coming soon to all major cities.
New York is going to be a fuckin' blood bath.
If you have any investment exposure in commercial office space in a blue city you best be divesting yourself of it, and soon.