By Meghan Hall
Just weeks after closing on 900 Kearny Street, San Francisco-based investment firm Brick & Timber Collective has closed on a second property in Jackson Square, bringing its total investment in the neighborhood to just under $60 million this month. In a deal that just recently closed, Brick & Timber Co. purchased 450 Pacific for $31.7 million, or about $1,109 per square foot, according to an industry source familiar with the transaction.
Brick & Timber Co. purchased the Jackson Square office building—originally constructed in 1906—from Keesal, Young & Logan. The law firm originally acquired the property back in 2007 for $7.8 million. Keesal, Young & Logan will lease the building for 6 months before moving to a new location.
The sale was brokered by the San Francisco team of CBRE, which was represented by Michael Taquino, Kyle Kovac and Russell Ingrum.
Brick & Timber Co.’s acquisition of 450 Pacific comes just weeks after the company paid $27 million, or about $900 per square foot, for 900 Kearny. Built in 1989, the six-story, 30,000 square foot office building is currently 100 percent occupied by EastWest Bank, Bitmami, Novani and others. The seller was Newcastle Partners, who initially purchased the asset in a joint venture with Drake Real Estate in March of 2017 and renovated the building by creating open offices and single-floor suites. Previously, the 900 Kearny property had been owned by a private family.
“We really like 900 Kearny as a contrarian business plan to the traditional Transbay Terminal large corporate-user buildings. Jackson Square is now a hotbed of high-end VC and private equity firms. We intend to gradually build out each space that comes available to a full, open ceiling, creative office design. It will be a dramatic improvement to the current look. The bones of the building and submarket location are exactly what we want for our portfolio,” said Dennis Higgs, managing partner, Newcastle Partners, when the firm originally purchased 900 Kearny.
Office demand throughout San Francisco remains robust, and according to a second quarter San Francisco office report released by CBRE, the lack of available space is pushing tenants into “uncharted territory.” Throughout the first half of 2019, there were 11 lease deals that were greater than 100,000 square feet, even as vacancy remains below four percent. Asking rents have increased to $85.64 per square foot at the end of the second quarter and have risen by 13.4 percent year-over-year.
The Jackson Square and Waterfront District submarket, located just outside of the Financial District, has one of the lowest vacancy rates in the city, where Class A vacancy sits at 1.7 percent. The Jackson Square submarket also had the largest quarter-over-quarter rate increase, CBRE reports. During Q2, asking rates increased by 6.3 percent to $79,95 per square foot, up from 21.1 percent a year ago. Technology firms continue to drive activity in both Jackson Square and throughout the city; during the second quarter, 62 percent of the top 25 leases were solidified by tech companies looking for space.