By Kate Snyder
In of the first meaningful commercial real estate transactions to be completed in San Francisco, Mountain View-based Sobrato Organization has closed today on the purchase of 162,000-square-foot 1 Harrison on the city’s waterfront. The seller of the property was Gap, which placed the property on the market in 2022 following a decision to vacate the headquarters building of its Athleta brand. Sobroato paid roughly $80 million for the property or approximately $495 per square foot. This price will, in many ways, set a watermark for commercial property transactions in San Francisco, which has not seen many deals occur over the last year.
Eastdil Secured is the broker on the listing. A representative from Eastdil did not immediately respond to a request for comment.
“The Sobrato Organization takes great pride in acquiring well-located quality real estate with a long-term perspective,” said Chase Lyman, senior vice president of leasing and acquisitions. “We have seen tremendous momentum in ‘Flight to Experience,’ and 1 Harrison embodies all the fundamental attributes that the post-pandemic tenant desires. Located on the waterfront, tenants will enjoy unparalleled water and bridge views, expansive ceiling heights, indoor/outdoor connectivity, and a unique and prominent branding opportunity.”
The building is six stories with waterfront views and 30,000 square foot floorplates. It is located in close proximity to public transit and highway access points to the entire region. The property sits on 0.67 acres and is located in San Francisco’s Rincon Hill neighborhood, just west of the Bay Bridge and right on the city’s eastern edge, tucked against the Bay. Located nearby are Google’s San Francisco office, the University of San Francisco’s downtown campus and Rincon Park.
The San Francisco office market is facing much uncertainty as companies continue to grapple with the effects of the pandemic – part of it related to a question of just how much office space is needed in this day and age compared to pre-COVID times.
According to a recent Newmark San Francisco Market Snapshot from February of 2023, the 88.5 million square feet of office space across the city is now 22.1 percent vacant, which is up from 19.1 percent from the previous quarter and up from 16 percent a year ago. Additionally, over the past 12 months, 23,000 jobs were lost in San Francisco with another 1,307 lost just in January, although recent reporting shows some positive aspects may be overlooked when layoffs are reported.
In the past year, some previously listed commercial properties in San Francisco have been pulled after receiving little interest from investors.
Last year, two separate office properties in San Francisco hit the market, and while there was interest from investors to acquire them, it wasn’t at the level that the owners had anticipated, and the two properties were ultimately removed from the market in the third quarter. Those properties were at 455 Market Street and 550 California Street.
UBS Realty Investors owns the 374,203-square-foot 455 Market Street office building and had set pricing guidance on the sale at $280 million, or $750 per square foot. UBS also worked with Eastdil’s San Francisco office as the listing agent. The property at 550 California is owned by Wells Fargo, which placed the 355,000-square-foot building on the market for $160 million, or roughly $450 per square foot. Wells Fargo had engaged the San Francisco office of JLL to market the asset.
These properties may enter the market again if conditions in San Francisco improve, however, there have been no confirmations of such intentions at this time.
Even as uncertainty around companies utilizing office space and announcements of layoffs by the thousands, some of the largest tech employers in the region have still increased their payrolls significantly since 2019.
Data released by Newmark shows that despite the layoffs, these companies are still on a steady path of growth in their workforce. Amazon’s employee count has nearly doubled since 2019, Meta’s workforce is still nearly 75 percent more than what it was three years ago and Apple’s workforce grew by approximately 20 percent in just three years, according to the data.
