By Jon Peterson
New York City-based Mitsui Fudosan America and San Francisco-based SKS Partners have formed a joint venture for the development of 270 Brannan Street office building in the South of Market district in downtown San Francisco. There is a third partner in the project, South Beach Partners.
“We think there is strong demand for new office space in San Francisco from either technology or technology-related tenants. We are ready to start this project on a speculative basis if we have to,” says Daniel Kingsley, a managing partner with SKS.
Mutsui Fudosan did not respond to an e-mail for the deadline for this story. SKS declined to comment on the projected development cost of the office building.
“This is our first development with Mitsui Fudosan. We are hopeful that our relationship with them will be a long lasting one going forward,” said Kingsley.
Mutsui Fudosan is the main equity investor in the project and has a majority ownership position in the property. SKS did invest some equity into the project and is the operating partner on the development.
The leasing agent on the development is Mike McCarthy, a senior vice president at the San Francisco office of Colliers International.
“I think that based on the early conversations that we have had with potential tenants that there is a good chance that this property could be leased to a single tenant. This could be a technology or technology-related kind of tenants. [The] property could be leased to a company already in San Francisco or one that is looking to move into the city. Many of these companies are looking to tie up their space needs now for two years down the road,” says McCarthy.
He sees that rents in SoMa have changed a lot over the past 12 months. “I think that the deal we will be signing at 270 Brannan will be around $70 per square foot on a full service basis. Last year at this time the same kind of space would have been priced at $55 to $60 per square foot,” said McCarthy.
He still sees tech tenants looking for special amenities. “The three items that come up in property tours are a place to park bicycles, showers and dogs can be brought to work. All three of these amenities are planned to be available for a tenant at 270 Brannan,” says McCarthy.
McCarthy doesn’t see the negative publicity that many technology tenants are facing in San Francisco affecting 270 Brannan. “This project is not displacing any current residents. I think that this project is a good use of real estate. The site is now the home of a surface parking lot,” he said.
Office vacancy in the SoMa submarket still remains very tight. “Vacancy for Class A space is now about 8 percent. This is especially true for tenants looking for space of around 100,000 square feet,” said McCarthy.
Mitsui Fudosan America is the U.S. subsidiary of Mitsui Fudosan Co., Japan’s largest publicly quoted real estate company. MFA has additional investments in other major markets in the United States like Los Angeles, New York, Chicago and Washington, D.C.