California building sells for $64M less than 2019 as problems plague city

A property in California that sold for $86 million in 2019, has been acquired by a new owner for $64 million dollars less.

The building, at 410 Townsend street in San Francisco, was bought for just $22 million, SFGATE reported this week, in what could be an illustration of how the city is still battling against an underwhelming office real estate sector.

The property boasts 78,000 square feet and four floors and had been a home for tech firms in the area, said the website.

San Franscico’s office market is still struggling to recover from the COVID shock when lockdowns and stay-at-home orders led to a significant rise in home working. There were vacancy rates of about 22 percent at the end of the first quarter of 2024, according to real estate firm CBRE’s analysis.

But the new owners of the 410 Townsend street property believe the market is about to rebound.

“It’s our opinion that this is the start of the recovery for the San Francisco real estate market and 410 Townsend provides us with the opportunity to acquire a best-in-class creative brick and beam office asset well below replacement cost and where the asset traded in 2013 and 2019,” Albert Pura, senior director of one of the buyers, New York Life Real Estate Investors, told SFGATE.

But San Francisco’s office space real estate fightback is still in the early stages. CBRE’s analysis showed that the city ended the first quarter of this year with what they described as negative 387,000 square feet of net absorption

It was “the seventh consecutive quarter of occupancy losses,” the analysis said.

Homes have been hit hard too.

The data did show some interest in offices from research and development tenants, whose demand was up by about 56 percent. But even then, the nature of their interest pointed to some softness in the overall market.

“The increase in tenant demand is largely driven by tenants who need to make decisions about their space as their leases are coming to term. Many companies are seeking to reduce the size of their current space, which portends further occupancy losses,” CBRE’s report warned.

“The software and internet industry continued to lead demand along the Peninsula contributing to about 51.3 percent of the active requirements.”

CBRE’s says its report looks at the office building market of at least 10,000 square feet and collects its information “through telephone canvassing, third-party vendors, and listings received from owners, tenants and members of the commercial real estate brokerage community.”