Pivoting is an often-deployed strategy around the Bay Area, and the current state of retail has forced one developer to rethink a 264,440 square foot retail development located along one of the city’s main arteries. Dallas-based Cypress Equities sold in early August its property located at 945 Market Street to a joint venture between Alexandria and TMG Partners for $179,000,000, or around $677 per square foot, according to a public filing by Alexandria. “We are excited to be bringing this important property under local control and look forward to securing a mixed use project with a strong retail presence,” the company stated earlier this year.
Alexandria will hold 99.5 percent interest in the consolidated joint venture, according to the company’s published documents.
The Gensler-designed development is the largest recently completed development between 5th Street and 9th streets in San Francisco. The 6×6, another name for the project, is also one of the largest retail development projects in San Francisco in nearly two decades since the Westfield Mall opened in 1998. The project is located in the bustling Mid-Market retail corridor and is ideally situated in between Union Square, the Hotel District and San Francisco’s South of Market (SOMA) neighborhood.
Dallas-based Cypress Equities began construction of the site in 2014 and had hopes of having tenants lined up by the time construction was completed in 2017. With a lack of interest in retail tenants, converting the existing retail space into office space was a logical and necessary next step.
“The retail market has clearly gone through significant change over the past few years,” said Chris Maguire, the chief executive officer for Cypress Equities in an interview with The Registry in 2018. “As such, we as a landlord need to adapt to the changing nature of retail.”
“We have been approached by retail users that would also require office space for their business, which we are currently not permitted to do,” continued Maguire. “We also believe that a mix of uses can complement the overall project as office users will drive a daytime population that will use the building retail and restaurant businesses.”
Currently, 945 Market Street contains 264,440 square feet of retail space spread throughout floors one through five and includes 175 vehicle parking spaces and 50 Class 1 bicycle parking spaces in a sub-grade parking garage. The parking garage, which opened in March 2017, has been the building’s primary source of revenue due to lack of retailer interest in leasing the space.
“Our hope is that we can merchandize the building so that it appeals to the demographics surrounding the property as well as the tourist market,” added Maguire.
The proposed changes to the project included converting 47,520 square feet of retail space on the third and fourth floors into Class A office space. 23,795 square feet of the third floor’s 44,7895 square feet would be utilized as office space, while the other 21,000 square feet would remain as retail space. A similar amount of space would be converted into office space on the fourth floor; 23,725 square feet would be designated as office space and 21,070 square feet would be used as retail space. While the office and retail spaces would be separated by a wall, there were no other proposed structural or design changes to the 945 Market Street building, and all other spaces at the project site would remain the same.