For-sale signs at downtown offices across the Bay Area have grown tattered, with sales hitting a decade low.
Only three investment-grade office buildings in the San Francisco, Oakland and San Jose central business districts have changed hands this year, a sign of weakness in beleaguered downtowns, the San Francisco Business Times reported.
As 2022 draws to a close, year-to-date office deals for 300 Grant Avenue and 180 Townsend Street in San Francisco, and 300 Frank H. Ogawa Plaza in Oakland represented $296 million in total sales, a fraction of annual office investment before the pandemic, according to CBRE.
There were no premium office sales in Downtown San Jose.
Sales volume in the three downtowns averaged $5.45 billion a year in the six years leading up to the pandemic, and regularly racked up 30 to 45 deals of $25 million and more.
The slowdown is another reflection of the Bay Area office market in the post-pandemic era, with central business districts hit hardest by the remote work trend.
Office availability last quarter was 28.8 percent in Downtown San Francisco, 19.9 percent in Downtown San Jose and 27.5 percent in Downtown Oakland, according to the Business Times. Vacancies are expected to climb higher in the fourth quarter, market experts say.
The market looks better outside central business districts. There were 64 investment-grade sales this year in the metro area, far below the 137 in 2019.
A deep uncertainty over the future of the office market in San Francisco has put the brakes on the sale of some investment-grade properties.
Wells Fargo listed 550 California Street, a 355,000-square-foot, 13-story office tower in Downtown, but pulled it off the market after bids came in at lower-than-expected prices. Likewise for UBS Realty Investors, which yanked a 23-story, 372,000-square-foot office building at 455 Market Street.
The market hasn’t determined the value of office buildings in a post-Covid world, Colin Yasukochi, head of CBRE’s tech insights center, told the Business Times last fall.
“Although theoretically the value of these buildings is lower today than pre-pandemic, there are very few on the market to be sold,” he said. “So there aren’t really any completed transactions to point to.”
The biggest sale this year was a new 70,000-square-foot office and retail building at 300 Grant Avenue in Union Square, which sold in August for $155 million to South Korea’s Hanwha Group. Tenants include Brilliant Earth and Arc’teryx.
— Dana Bartholomew
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