San Francisco Office Market Shows Signs of Life

livemint.com:

San Francisco’s beleaguered office market, the hardest hit of any in the U.S. since 2020, is beginning to display flickers of life. Technology companies’ rapid adaptation of remote work, along with an increase in crime and other quality-of-life concerns, hollowed out San Francisco’s business district.

Vacancy rates soared to new highs, while building values plummeted. Now San Francisco’s office market is seeing progress for the first time since the onset of the pandemic. Company searches for office space in the city are the highest they have been in years.

Firms in the growing artificial-intelligence industry are leasing large blocks of space, signaling that the city’s appeal as a tech hub hasn’t evaporated. After a long stretch when the city’s office buildings couldn’t attract buyers even at cut-rate prices, sales are slowly materializing. Investors have purchased or agreed to purchase five major office towers in recent months, already making 2023 the most active year for sales since 2019.

Office transactions are resuming largely because some sellers are at last surrendering, accepting prices that would have been laughable four years ago. A local investment group, for example, purchased 350 California Street for $61 million, or about a fifth of what the building was valued at before the pandemic. Other recent sales have gone for half or less of the office property’s prepandemic value.