As we outlined yesterday, the amount of vacant office space in San Francisco now totals over 29 million square feet, having increased by over a million square feet in the first quarter of this year despite the “AI Boom!”
For context, the 1,070-foot-tall Salesforce/Transbay tower at First and Mission, which is the tallest building in San Francisco, contains 1.35 million square feet of office space spread across 59 floors.
And employing the framework we developed back in 2020 and others have since co-opted as their own, there is now 21.5 Salesforce Towers – or nearly 1,300 Salesforce Tower floors – worth of empty office space spread across San Francisco, which is roughly enough space to accommodate between 166,000 full-time employees, based on pre-Covid office density ratios, or up to 223,000 part-time or former twitter/X-esque worker bees.
For additional context, that’s roughly 692 times Google’s headline lease of 42,000 square feet of additional office space in the city, which was billed as a bullish sign of a major player “bucking the trend” three years ago, when there was over 50 percent less vacant office space in San Francisco, or over 1,700 times the headlined “full floor leases!” at 350 California Street last year.
At the same time, there are now over 16,000 fewer San Francisco residents with a job than there were are the same time last year, with over 39,000 fewer employed people in San Francisco than there were at the end of 2019, prior to the pandemic, and over 30,000 fewer people in the local labor force, with Bay Area employment nearing 2015 levels.
Time for capitulation?
ASB Real Estate Investments has listed a 117,200-square-foot office building in San Francisco’s Mid-Market for a reported $12 million — or 80 percent less than it traded for a decade ago.
The property – 989 Market (The original flagship of Hale Bros before they moved to 5th Market)- is being marketed @ ~$100/gsf; IIRC isn’t that around the magical number where residential conversion might start to make sense ?? And if not for “the overwhelming majority of commercial property in SF” maybe a somewhat more whelming segment than formerly? Of course plugged-in readers will recognize that conversions have never been impossible per se, since they’ve seen a number of them in these pages over the years – it just might seem like it.
At 97,512 square feet, 989 Market Street would represent a whelming 0.3 percent of the vacant office space in San Francisco.
Which, of course, isn’t even underwhelming (microwhelming?) No: I was suggesting that this might be a new threshold for properties in general…at least to the extent that one can generalize about 30Mgsf. (And this property is probably the weirdest of all: altho the build date of 1907 is generally correct, I believe the facade actually prdates the Fire…having been preserved by a unique process that required supprting it with guywires during reconstruction)
Recent Class B sales in San Francisco, including short-sales, have been averaging closer to $260 per square foot.
Well, sure. This site has pointed out a few times over the past couple of years that while 100 Van Ness (the old AAA building) was a successful recent office high rise to residential high rise conversion, it was successful because the cost basis was under $200 per existing ft.², including an adjacent building which was then demolished to yield a “bonus” 429 units of housing.
The listing I saw for 989 Market Street (a 6-story) indicates the building class is “B”. That classification is probably due to the building having been built in 1907, you wouldn’t think that looking at the interior finishes (it’s been remodeled).
“B” would seem generous, given the age – and environs – of the building, tho I confess I know nothing of what shape it’s in, or what upgrades it may have had.