By Jon Peterson
Following the approval of its massive Central SoMa development project in December of last year, Boston-based Boston Properties has closed on the sale of the parcel located at 4th and Harrison for $140.1 million, according to the publicly-traded real estate investment trust’s 2020 second-quarter earnings report.
Boston Properties had entered into an option agreement to purchase the land for 4th and Harrison in 2014, according to a statement by the company.
The potential development of this project would amount to a total of 804,000 square feet, which is slightly lower than the previously approved approximately 820,000 square feet. It is not certain at this time when the development project would be started and completed. When the city’s approval was granted, the company stated that construction could start in the second half of this year, however this was the plan well before the start of COVID-19. Now, the development has been paused until the public REIT can evaluate the effects of the pandemic on the industry given the current market uncertainty. For now, this project will not be started on a speculative basis.
The vast majority of the space of this project will be dedicated to office space. This part of the development will total around 770,000 square feet. The initial amount allocated to Boston Properties as part of San Francisco’s Prop M annual office development limit was 505,000 square feet, however, the city allowed additional space after it saw the full extent of the company’s development plans. “Boston Properties has, once again, outdone themselves in creating a unique development project that raises the bar in innovation and sustainability and provides direct benefit to the surrounding community,” said Joel Koppel, the vice president of the City of San Francisco Planning Commission, at the time in a statement.
The other parts of the project are 36,000 square feet of retail space and 16,700 square feet of public open space.
As part of the project, Boston Properties will also have a 15,000 square foot portion of the site set aside to the City of San Francisco for the future development of a 144-unit affordable housing project.
This development is located within the central SoMa district of San Francisco, which is the next area of the city slated for massive redevelopment by a number of property developers. However, these plans may be put on hold for the foreseeable future if the market conditions continue in the direction they have since the start of the Coronavirus pandemic. There has been a significant uptick in the overall vacancy in the SoMa sub-market for office space. In its second quarter of 2020 earnings call earlier this week, Alexandria Real Estate Equities stated that the vacancy has moved from 1.3 percent to four percent.
Boston Properties is a major owner of office buildings assets in the San Francisco Bay Area. Through June 30th of this year, it was the owner of 37 buildings totaling 7.8 million square feet. This portfolio was 93.2 percent leased. The markets where the public REIT owns space include the central business district of San Francisco, South San Francisco, Mountain View, Santa Clara and San Jose.