By Jon Peterson
PGIM Real Estate has placed on the market for sale the 183,000 square foot office building in San Francisco’s Financial District located at 255 California Street. The price point on the sale could reach $875 per square foot, or $160 million, according to multiple sources familiar with the sale of the asset.
PGIM declined to comment when contacted for this story. The real estate manager has owned the property, formerly known as the Industrial Indemnity Building, since December of 2012, as stated in public records. PGIM paid $75.8 million for the building at that time. When it purchased the building, PGIM had made an initial investment in the property along with San Francisco-based Ellis Partners before taking full ownership of the building subsequently.
The listing agent on the current sale is the San Francisco office of Eastdil Secured.
255 California could easily be sold to another major institutional owner like its current owner. The property is home to a number of credit tenants that include Liberty Mutual, Glass Lewis, Solomon Cordwell Buenz and Sojern. A number of leases will be rolling in the property over the next few years, which would provide the new owners the possibility to add value to the investment and bring the leases to market rates.
Developed in 1959 and designed by Skidmore Owings & Merrill, the office building is considered to be a Class A asset. The property is a mid-rise structure that has a total of 14 stories and a unique balcony feature that spans two sides of the building facing the street on the second floor. One of its most prominent tenants on the ground floor is a Starbucks coffee store.
The property joins a number of other recently announced properties in San Francisco that have hit the market. Just in the last week, two buildings were placed up for sale by Turkish real estate investor Polidev Investments. The 85,423 square foot, Class A creative office building located in the San Francisco Jackson Square neighborhood at 747 Front Street is looking bring $75 million, or roughly $877 per square foot. At the same time, the 145,303 square foot, historic 351 California Street office building located in San Francisco’s Financial District is hoping to reach $120 million, or roughly $825 per square foot.
According to a recent, fourth quarter of 2018 San Francisco Office Market Report by Newmark Knight Frank, the office market in the city continues to be extremely competitive as a result of diminishing vacancy and robust tenant demand. Current availabilities total 6.6 million square feet, yet demand is also 6.6 million square feet, the report stated. The result has been an increase in rent of 12.8 percent year-over-year to $82.47 overall. Large-block pricing has gone up further, according to a statement in the report, and tenants leasing more than 50,000 square feet are paying a premium averaging nearly 10 percent, while tenants leasing more than 200,000 square feet are paying a premium of more than 20 percent.
Availability rates are the lowest in over a decade, concluded the report.