By Jon Peterson
There are now two non-entitled development sites in the South of Market neighborhood in San Francisco up for the sale that will test the investor demand for these projects. The two locations are 701 3rd Street and 500 Townsend.
Pricing for the 500 Townsend site has come in at very high levels. There has been a non-refundable offer at $170 per square foot, according to sources with direct knowledge of the transaction.
“This level of pricing would make it as high as we have ever seen for non-entitled sites in the San Francisco. I think that you are seeing this level of pricing because there are many developers, and capital sources believe that there are rental rates and demand for office space in SoMa that make a high level of pricing feasible,” says Seth Siegel, an executive director with Cushman & Wakefield in San Francisco.
The Cushman & Wakefield team in San Francisco includes Seigel, Adam Lasoff, Grant Lammersen and George Eckard. They are marketing for sale the site at 701 3rd Street, which has been family-owned for a long time. Siegel declined to comment on the potential pricing for this site.
The current zoning of the site is very flexible. The MUO zoning permits the future development of either office, hotel or residential. For an office building the site could accommodate up to 100,000 square feet, and a residential project would allow for approximately 100 units. This could be for either a condo project or apartments. Siegel was unsure how that would translate into hotel rooms for a potential hotel project.
The site at 701 3rd Street totals 13,750 square feet. “I would expect that we would attract a wide range of capital sources looking at this site. This would include office building REITs and companies that are involved in the development of housing for either condos or apartments,” said Seigel. He estimated approximately a month for a buyer to be selected for a sale.
The site does have a McDonald’s restaurant on it that totals 3,200 square feet. This tenant has a lease that runs through January 2017. This will give the new owner of the site some steady cash flow during the time it works through the entitlement process.
500 Townsend is a 1.24-acre site. The current ownership is a local family that has held the asset for years, as well. The sales listing on the site is held by Cornish & Carey Commercial Newmark Knight Frank. One person involved is Mike Taquino, a managing director who works in the San Francisco office for the company. He declined to comment for this story.
The site could handle an office building development totaling 295,000 square feet. A final decision on selecting a buyer could be happening within the next several weeks.
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