Another Office Tower Trades Hands in San Francisco as Local Market Soars
By Alex Girda, Associate Editor
As the San Francisco office market becomes one of the healthiest local markets in the entire country, the rush is on for investors to capitalize on the impressive appeal of the San Francisco Bay Area before 2013 draws to a close. We’ve recently reported on the major deals completed in the city for high-profile office assets, and now KBS Real Estate Investment Trust III is adding to an already impressive tally of major real estate transactions completed just weeks before the end of Q4. The public non-traded REIT recently shelled out $121 million for an office building in the city’s South Financial District.
The deal included 201 Spear Street, a 246,563-square foot, Class A office tower in San Francisco’s SFD. The Spear St. asset stands 18-story tall on the waterfront of the San Francisco Bay and had an occupancy rate of 82 percent at the time of the transaction. The building’s tenant roster includes names such as Verizon Business Solutions, CoreLogic and Moovweb. With the city seeing improving average rates in terms of vacancy and rent rates over the past year, the new owner will most likely also look to benefit from the high tech appeal the local market currently has.
According to Marcus and Millichap Real Estate Investment Services, the city’s office market saw a surge of 33 percent in terms of deals for the last 12 months ending in October of 2013. However, a large chunk of those deals were recorded in December 2012, just before the end of last year’s Q4. It is apparent that the statistics will show a similar hot streak by the end of 2013. In terms of vacancy, the city is outpacing the national average rate, currently at around 16 percent, with its rate currently at around 12 percent, a level the market has not seen since the downturn.
Chart courtesy of Marcus & Millichap Real Estate Investment Services at marcusmillichap.com