Alexander Spatari/Getty Images
- A 22-story office tower in San Francisco that was worth $300 million in 2019 is for sale.
- It’s expected to sell for around $60 million, real-estate brokers told The Wall Street Journal.
- It’s the latest example of the commercial real-estate crisis as cities deal with the impact of remote work.
A 22-story office tower in San Francisco is expected to sell for around $60 million — 80% less than it was valued at in 2019, The Wall Street Journal reported.
The office tower, which sits at 350 California Street, was previously worth around $300 million during its last sale, office brokers told The Journal. The street runs through San Francisco’s financial district — home to some of its booming tech companies.
The building’s expected decline in value reflects the current crisis facing the real-estate industry across the US, and remote work’s heavy impact on San Francisco’s office buildings, in particular. Almost 30% of the city’s office spaces are available to lease, according to a report from CBRE, a commercial real-estate-services firm. That’s five times higher than it was before the pandemic, and almost twice as high as the amount of vacancies across the country. Over a quarter of San Francisco’s office space is empty as well, according to CBRE.
Last summer, for example, Salesforce had half of its Salesforce Tower office space listed for lease as a sublet. The 43-story Salesforce Tower is San Francisco’s tallest building. A spokesperson at the time told SFGate that Salesforce could make use of the owned space in the future and was welcoming employees back into the office.
Earlier this month, an office building at 25 Taylor St in San Francisco, a building that was largely occupied by WeWork, saw its value plummet by about two-thirds, according to commercial real estate data firm Trepp. After WeWork moved out, the building was 97% vacant.
Tech companies made up 50% of office leasing requests in San Francisco before the pandemic, but that number dropped to around 33% last spring. In addition to the rise of remote work, the tech industry is facing a financial downturn, forcing some of them to make cuts that include closing offices or moving to other areas.
At the World Economic Forum earlier this year, real estate executives warned that unused office buildings would have to be converted or demolished.
“You will have a lot of obsolete buildings at the end of the day which are not suitable to be upgraded, or it is financially not viable,” Christian Ulbrich, CEO of JLL, said. “So we have to repurpose those buildings in some form or fashion, or they will be empty and will be taken down at some point in time.”
Whatever price the 22-story tower sells for will be telling for San Francisco’s office building market, the latest data point to likely drive home just how far prices have fallen since the pandemic.