By Jon Peterson
New York City-based Columbia Property Trust has made the decision that it will soon be putting on the market for sale the 620,000-square-foot office building located at 333 Market Street in San Francisco, according to sources familiar with the asset. No pricing guidance is available on the property at this time, although many commercial real estate professionals will be watching this trade as a watermark for office sales in the City.
A company representative of Columbia Property Trust declined to comment when contacted for this story. Industry sources have indicated that the San Francisco office of JLL will be the listing agent on the sale. This company did not respond to emails seeking comments about this sale.
Should the property be sold, it would represent one of very few major office buildings to trade in San Francisco this year. Many large institutional investors and public pension funds have been looking to downsize rather than expand their office building holdings across their portfolios. A major factor in this has been that many investors are expecting a value decline with the properties that they own in the San Francisco office market.
One of the pluses for 333 Market is that the property has a lease with a single tenant for the entire property. This is Wells Fargo, which renewed its current lease in the building for another 10 years in June of this year. In general, single-tenant office assets that are leased to strong tenants have garnered a lot more attention from office building buyers this year than multi-tenant properties with some vacancy or shorter-term leases. Capital sources are not interested in leasing up properties given the uncertain future of the office market in San Francisco.
Columbia Property Trust has been the owner of 333 Market since 2012 when it acquired the asset for $395 million, according to public records. The investment firm then brought in Allianz Real Estate of America into the asset in 2017. At that time the property was valued at $500 million. It is unclear what the value of the asset may be today, and certainly, that value will be driven by the demand that the property generates in the market. Columbia Property Trust owns 55 percent of the property, while Allianz owns the remaining 45 percent.
The overall San Francisco office market still continues to struggle. According to JLL’s second quarter 2022 office market report, the current vacancy in the city’s downtown core is 22.4 percent. There is no indication of when the market will start to show some optimism. Industry experts are not sure when more employees will return to the office on a regular basis and if trends that started over the last two years are going to be lasting.