SF Office Market Sees First Nine-Digit Trade Post-Pandemic

San Francisco’s office market led the headlines this week, especially DivcoWest and Blackstone Real Estate’s $111 million buy of 199 Fremont Street.

The 25-story, 420,000-square-foot SoMa office building was the city’s largest post-pandemic office sale to date.

DivcoWest already owned a 49 percent stake in the building in a partnership with CalSTRS, the California teachers pension fund, on the 2020 buy. The valuation of the 2000-built tower was $905 per square foot at the time, a far cry from the approximately $265 per square foot it sold for this spring. Other investors in the building included the AFL-CIO Building Investment Trust, which also owned 49 percent, and German fund manager Manova Partners, which owned a 2 percent stake.

Blackstone, alongside remaining investor DivcoWest, plans to completely zhuzh up the empty building with amenities such as a wellness and fitness center and a conference facility. It will also be renamed 300 Howard Street, the new owners said in a joint statement, and transformed from “an early-2000s tower into a high-performance hub built for today’s most ambitious teams.”

The transaction is an indication that investors are increasingly willing to acquire San Francisco office properties at steep discounts compared to pre-pandemic valuations, then reinvest in improvements to attract tenants. Other recent deals with the same strategy featured New York Life, Barings, Brookfield and Flynn Properties.

Flynn is reportedly in the process of buying the $416 million debt on two downtown San Francisco towers known as Market Center, for around $171 million. Paramount Group and an unidentified partner bought Market Center in 2019 for $722 million and defaulted on it last summer. When that deal goes through, it will be the biggest sale in the city since the pandemic.

JPMorgan SF office to grow by 65,000 square feet

In further good news for SoMa, news broke this week that JPMorgan Chase would expand its leased space at 560 Mission by more than 65,000 square feet, bringing its total to nearly 280,000 square feet. The building will be renamed the JPMorganChase Center, and will be the bank’s Bay Area headquarters.

The location will house more than 1,600 of the company’s nearly 7,000 local employees; the bank now mandates that most employees work in-office five days a week.

Mayor Daniel Lurie praised the move, calling it a vote of confidence in the city’s future and said it aligns with his administration’s focus on downtown business growth and safety.

The expansion also includes renovations at both the new headquarters and the bank’s space at One Front Street, where JPMorgan will keep about 102,000 square feet of leased space that it acquired when it bought First Republic in 2023.

“Cloud” over commercial from Trump tariffs

Commercial leaders are wondering if forward momentum will be stymied by uncertainty caused by President Donald Trump’s tariff plan and the subsequent seesaw of the stock markets.

San Francisco’s economy and its commercial market are largely driven by the growth of tech companies and venture funding, which has been on an upswing, Swig CEO Connor Kidd told The Real Deal. For now those companies are still growing and looking for space, he said, noting that conditions can change at any moment based on Trump’s next social media post. He added that early-stage companies aren’t really focused on the macroeconomy since they don’t have a product to sell yet.

His bigger concern, echoed by others in the business community, is that the general uncertainty, if it keeps up, could hit office demand a few quarters down the line.

“Businesses really hate uncertainty. It makes it difficult to plan and make decisions,” he said. “So I think the more that this goes on that it’s likely to have a negative effect more broadly and you’re probably going to see the [venture capitalists] start to pull back and say they’re not as certain they’ll be able to exit.”

Goodwill to close SF HQ, plus 11 stores

On the retail front, Bay Area Goodwill locations will be closing around the region after the merger of Goodwill San Francisco Bay with Phoenix-based Goodwill of Central and Northern Arizona.

That includes its local headquarters at 750 Post Street in San Francisco and a clearance center at 1301 30th Avenue, in Oakland. Stores and donation sites from Vacaville to Redwood City, will be shuttered, but the non-profit plans to replace them with larger big-box stores instead.

Tim O’Neal, CEO of Arizona’s Goodwill, said in a statement that the organization had struck an agreement to open a 27,000-square-foot store this summer at an undisclosed Bay Area location and that two similar stores are expected to open early next year. Goodwill also has 14 letters of intent in place at properties between 18,000 and 25,000 square feet at undisclosed locations.

DivcoWest, Blackstone pay $111M for SF office building