Berkeleyside reports that a Los Angeles real estate group submitted an application Thursday to build Berkeley’s first high-rise in 40 years. The 17-story luxury apartment complex on Harold Way that connects to the historic Hinks Department Store on Shattuck Avenue. We assume the condos will be for sale and not for rent. HSR Berkeley Investments proposes to spend as much as $200 million to construct a 180-foot tall tower with 355 residences next to the property that now houses the Shattuck Cinemas and other businesses.The Residences at Berkeley Plaza, are designed according to the press release to appeal to empty nesters and high-income professionals, such as those who work at booming San Francisco technology companies like Twitter and Salesforce.com, but who are having difficulty landing an apartment in SF.The project will be right by the downtown BART station with one-, two-, and three-bedroom apartments. There will be three towers.
The new units will be linked to the historic Hinks building on Shattuck and the Hotel Shattuck Plaza by a 12,000 square foot, publicly accessible central courtyard with café seating, public art, lush landscaping, and art and music shows. The public will be able to enter the plaza from four different directions, including a refurbished entryway from the old Hinks Department store. Hill Street Realty, which is the manager of HSR Berkeley Investments, bought the 92,00 square foot property for $20M or $217/square foot.Berkeley voters approved Measure R in 2010. Measure R led to the adoption of the Downtown Area Plan which permits the construction of up to three 180-foot buildings and four 120-foot buildings. (Two of those are reserved for the University of California).
SF Business Times reports that 2012 investment property sales (commercial buildings that changed hands) for 2012 is $6.1B second only to $8.5B in 2007. Foreign and Domestic Investors, Pension Funds, REIT etc. have spent an enormous amount of money this year in SF Commercial Real Estate. Will this trend continue? Anton Latsis the fabled Real Esate dealmaker does not think so and argues that buildings are selling in excess of $800 per square foot which is $150 more per square foot than it costs to construct. We think the trend will continue and overall sales volume will be the same with more new buildings being erected and changing hands, rehabs and sales of leased building.
To recap, the largest transactions of the year was $910M for 101 California which Nippon life sold to an Asian Partnership lead by Singapore’s Sovereign Fund. The highest price per square foot:$802 per square foot was 555 Mission street purchased by Union Investment for $445M. Still in the pipeline and due to close shortly are: 333 Market street in contract to be purchased by Wells Real Estate Funds for $447M. A German Pension Fund is purchasing 199 Fremont for for $250M. 343 Sansome, 475 Sansom, 255 California and 1000 Van Ness are sill in play. Keep in mind that anyone who sells before January 1st will avoid the increased Capital Gains Tax which are jumping from 15 to 23.8%.
The Registry reports that a Pension Fund: Multi-Employer Property Trust paid $159M or $450 square foot for 475 Sansome street, a 353,000 square foot SF office building. The tenants of the property are Oracle, Yahoo and Bank of the West.
It is no secret that we think that 140 New Montgomery, a renovation of the Art Deco Pacific Telephone company Tower, is one of the most beautiful office renovation projects in the United States. Full disclosure: our CEO and Chris Meany the Developer of 140 New Montgomery are acquaintances. Knoll will take 295,000 square feet on the 25th floor. Yelp took 100,000 square feet earlier this year. SF Business Times reports that Bar Agricole will open a cafe in the building which will face a restaurant run by the Chef of Aziza.
The Registry reports that Emeryville based Lithium Technologies, an established social marketing company, will relocate to a new 50,000 square foot Headquarter in the Standard Oil building in Downtown SF at 225 Bush street. This is interesting because this particular building has been traditionally leasing to such businesses as law firms and it confirms a trend for law firms and similar businesses to downsize and yield to Tech firms which are now everywhere in the City from South Park and Mid-Market to the Financial District.
Meraki, Splunk, SquareTrade and Docusign just took over 300,000 square feet of office space in the last couple months bringing Soma vacancy rates down to 3.7% according to SF Business Times. Meraki took 110,00 square feet at 500 Terry Francois Boulevard, Docusign 40,000 square feet at 221 Main, SquareTrade with 54,000 square feet at 360 Third, Splunk added 30,000 square feet at 250 Brannan. Splunk is paying $58/square foot with 3% annual increase. Rumor has it that Biz Stone is about to lease 75,000 square feet for his incubator at 760 Market and that Github will take 40,000 square feet at 275 Brannan. Salesforce may increase its existing footprint at Rincon Center by an additional 100,000 square feet and also become the anchor tenant of the yet to be built Kilroy Tower at 350 Mission. Google may be looking at 400,000 square feet either at Foundry Square which is under construction or at 222 2nd street a fully entitled project. The positive absorption rate for 2012 will probably be close to 1.3M square feet. Positive absorption rate for 2011 was an incredible 2.1M square feet. Average office rents in SF increased by 23% in 2011 and 25% in 2012 to $48 per square foot. Most SF experts predict a slowing trend and 10% yearly increases. We respectfully disagree and expect 20% increases to continue in 2013 based on the continued strong demand, the lack of inventory and the fact that entitled projects that have broken ground will not be ready until 2014 at the earliest. We would love to hear your comments.