An office building in downtown San Francisco is said to have sold for about 75% below its previously estimated value, a bad omen for the slumping commercial real estate market.
350 California Street, which first went up for sale in 2020, has been sold to SKS Real Estate Partners for between $60 million and $67.5 million, according to a report by San Francisco Business Times.
Most of the Financial District building is empty – Union Bank, which occupied about 75% of the building, has largely vacated the 22-story tower.
This wasn’t the first time the 350 California’s owners had tried to sell the property. According to Wall Street Journal. Realtors told the newspaper that in 2019, the property was valued at about $300 million.
San Francisco office towers don’t trade hands for much, with this sale setting a new standard for today’s market. “We’re all really on the edge of our seats to see the first office commerce in San Francisco,” J.D. Lumpkin, an executive at the real estate services firm Cushman & Wakefield, told the newspaper in April.
SKS Real Estate Partners has not returned SFGATE’s request for comment as of publication, nor has CBRE, which represents the property. Mitsubishi UFJ Financial Group confirmed that the property has been for sale since February 2023, but did not provide additional comment.
San Francisco-based SKS Real Estate Partners owns several properties in the city and the Bay Area, including 888 Brannan and 181 Fremont.
The office vacancy rate in San Francisco reached a new record high of 29.4% in the first quarter of 2023, according to a recent report by CBRE. That far exceeded the previous pre-pandemic spike of 19.1% during the internet crash in 2003, and is expected to continue to rise in the coming months. However, office rental rates haven’t budged much, which can make it difficult to attract new tenants to the downtown buildings.
“Vacancy will peak next winter,” David Smith, head of occupant research at Cushman & Wakefield, told SFGATE in April. “…tenants in the market signing on for less space than they previously had. We’ll continue to see that through the rest of the year and into 2024. It’s a year of rebalancing.”
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