Friday, March 25, 2005

REAL ESTATE FRIDAY FOCUS: Commercial Real Estate, San Francisco's Goldilocks Market 

Douglas W. Shorenstein, the chief executive of his family business, sold his company's interest in the Bank of America Center and three other properties in San Francisco in the last 18 months.--NYTimes

There has been a sudden spike in commercial real estate prices in San Francisco, according to the New York Times. The privately owned Shorenstein Company is now selling its San Francisco properties in an attempt to diversify its holdings throughout the rest of the country. Prices are high in San Francisco, despite the dot-com bust, and Shorenstein is selling off properties while the market is hot.

Nearly $2 billion worth of prime office buildings changed hands in 2004, exceeding the 1998 record of $1.92 billion, with some properties drawing as many as two dozen bids. The average price for all buildings in the central business district was $304 a square foot last year, up from $235 a square foot in 2003, according to Reis Inc., a New York research firm.

Several buildings have traded for $400 a square foot or more, including 555 California Street, which is no longer the national headquarters of Bank of America but has a roster of blue-chip tenants, including Goldman Sachs.

The 52-story reddish-brown granite tower and adjacent buildings were bought by a group of New York investors, led by Mark Karasick and David Werner, for $825 million, or about $487 for each rentable square foot. Mr. Shorenstein's father, Walter, acquired the building from the bank in 1985 and later sold a half interest back to the bank.

The investment market here is beginning to resemble that of Washington, where the average trading price last year was $363 a square foot, according to Cassidy & Pinkard, a local real estate services company. But the average vacancy rate in Washington was just 7.5 percent in the fourth quarter of last year.

In this city, by contrast, some brokers estimate that the top buildings have a vacancy rate of 19 percent, with most of the empty space on the lower floors. Employment has only just begun growing slowly after four years of job losses. Employment is expected to increase 1.2 percent this year, said Mark Zandi, the chief economist for Economy.com.

The New York Times > Business > Commercial Real Estate: San Francisco's Goldilocks Market


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