March 21, 2017


Here’s what happened in the Residential and Commercial San Franciso Real Estate Market since January 21:


6 stories planned on top of the building next to Sam’s Diner at 1236 Market which would extend in the back to Grove street. The existing building was the site of a gym and will become a hotel.


1100 Broadway in Oakland, a 320,000 sq. ft.  entitled site sold for a rumored price of 9-10M. More to come.

Another entitled site in Oakland  is the 650,000-square-foot office tower at 601 City Center which is not yet in play and 3338 21 St street is going through entitlements for 800,000 sq. ft. of office space. Office rents in Oakland are above the $50 per sq. ft. per year for Class A. which is higher than the $35 of only a couple years ago but it does not quite  justify new construction hence the number of rehab projects.

In SF there is a redevelopment of 351-353 9th Street which will produce  31 apartments over 3,600 square feet of Commercial.


736 Hyde may become up to 11 residential units most likely rentals.


Another Fory Niner: the 49,580-square-foot office project at 345 4th St. is part of new office building construction that are not affected by proposition M which puts a cap on new office building construction. Owner paid $7.5M in December for those of you interested in calculating potential net profits. Keep in mind the cost of materials has gone up exponentially and even Forty Niners are expensive to build.


San Francisco traffic congestion problem is enormous: SF has the worst roads in the country and one of the highest number of pedestrian and bicyclist fatalities and injuries. It is also pretty safe to assume there are dire pollution consequences to the traffic congestion. Congestion pricing would be a solution to this issue but it is never brought up by City Planners. Automated Speed Cameras would help decrease fatalities but City Planners again do not address the issue. The current incentives to reduce traffic congestion are arguably doing nothing to improve the situation consider the incentives commercial and residential developers have: The current point system gives developers points for car sharing dedicated parking spaces, bicycles for tenants, setting up shuttle services for residents, dedicated child care etc. This system is not effective in our opinion and we are surprised a world class city like SF does not even attempt to implement congestion pricing which London and Singapore have successfully implemented. It is also surprising that automated speed cameras are not implemented.

Macy’s Stonestown at 280,000 sq, ft.  sold for $40.7 million or $148.9 per square foot. Congrats to the buyer. Great price.

Salesforce Tower has such tenants as Accenture and CBRE. We’re waiting to find out if any of the major Tech company express interest in some of the 1.4M office building.

634 Second St. at 46,752 sq, ft sold for $40M or $856 per sq. ft.

222 Kearny sold the 148,797 office building at 222 Kearny for $51,8Mo or $348 per sq. ft. Great purchase indeed.

One Oak at the South Van Ness Muni Station will be right next to 1554 Market and 435 foot tall. The building will create a hub with 4000 sq. ft of retail and a 15,000 sq. ft. foot plaza. More to come.


The 800 foot Transbay Tower at 550 Howard is also on its way.


Interesting condo building at 1965 Market in the works. Apparently 96 condos on this great location over commercial.


The small 2 story  building at 570 Market next to the 7 Eleven is in play for 16M or 1000 per sq. ft. since it is zoned for up to 300 ft.


The Action Rentals building at 1526-1530  Folsom is also in play and includes the parking lot at 1560 Folsom and two parcels at 135 Kissing and 276 11th street. Price unknown so far.


The site of the gas station on Howard and 9th is attempting to become t be 124 rental units over commercial.


Another good purchase was 600 Townsend which sold for $50.5M or $609 per sq. ft.


January 21, 2017

Here’s what happened in the SF Bay Area Residential and Commercial Real Estate Market since 11/26:

Tishman sold Foundry Square lll, a 91,093-sq. ft. building which it built and leased for $350M or $1200 per sq. ft. You may love them or hate them but the end result speak for itself.

Note for example that 140 New Montgomery sold for $284 M or around $962 per square foot back in April 2016…222 2nd street is next…

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The 100,325-sq. ft.  medical office building at 19000 Homestead in Cupertino directly across Apple sold for $67 M or $667 per sq. ft.

 118-unit residential development will be built at Golden Gateway and Van Ness.No news if it is going to be condo or rentals. There is a lot of activity in that area. We discussed French American building a 320 footer mixed use on the lot it owns across its campus on Franklin with at least 300 units, most likely rentals. Then at One Oak there is another tower planned which will be 300 condos. Another 329 condos will be built at 1001 Van Ness. CPMC will open its hospital on Van Ness in 2019. As readers of this blog can attest, we never tought the Van Ness corridor would undergo such transformation. It would be great to plan trees all along Van Ness from Lombard to Market…

We hear that Family Offices of Arab Royals are eagerly looking to purchase real estate assets in the US: The Qatar Investment Authority  bought the St. Regis for $175M. This raises an important issue for owners of branded condos such as the St Regis condos. The value of the condos is closely related to the quality and brand of the management.

55 Francisco a 145,000 sq.  ft. office building  with 274 parking stalls at Francisco and Montgomery sold. for about a rumored $93M or per sq. ft. or $641 per sq. ft.

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Park Tower at Transbay (corner of Beale and Howard) is about to start construction and will be  743,000 square feet of office space.

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NerdWallet is sub-leasing part of Twitter’s space on Market (about 100,000 sq. ft). Nexdoor and Thumtack are next and we don’t know the square footage they plan to sub-lease.



100 Pine street a 402,000 sq. ft. office building  sold for $289M or $720 per sq. ft.



CIM Topped the 350 unit One Mission Bay which will be rentals.



The 900 foot Oceanwide Center Next to Golden Gate University second in height only to the Salesforce Tower broke ground. It will be hotel office and condos over retail.



Meineke Car Care Centers is looking for 30 locations in the Bay Area…which comes as no surprise since the Bay Area and SF in particular have the worst roads in the country according to TRIP.


CIM Group (full disclosure CIM is a client) paid $123M to purchase 55 Hawthorne  a 143,000 square foot Class A Building or $860 per sq. ft.



400-430 California a 247,000 sq. ft. office sold for $135M or only $547 per sq. ft.




Our colleague Redfin who has written very insightful residential real estate reports indicates in a widely disseminated article  that bidding wars for residential real estate in SF have ended except for only 3 neighborhoods: inner Richmond, Dolores Heights and Parkside.




88 Bluxome Street site of the 230,000 sq. ft. San Francisco Tennis Club sold for for $140 million or $608 per sq. ft. and will lease it to Seller for unknown period of time. New owners plan to get entitlements to develop 1M square feet of office space. We always advise clients to entitle their assets which is the best protection against eminent domain and also the best way to command high prices. Note that the Central Soma Plan has not been approved and the buyers of this asset and other similarly situated assets also face the uncertainly of office rents going down, new condo prices going down while labor and material costs go up. Not easy to be a developer…


Here’s what happened in the SF Bay Area Residential and Commercial Real Estate Market since 8/29:

Another hotel has been proposed: a 480-room hotel  at 350 Second St. which is now a parking lot. Other hotel projects are at 55 Howard, 1125 Market, 744 Harrison, 399 5th, 300 5th (on the site of the Shell gas station across from Mosso).

The Tiffany building at 360 Post sold for 135M or $1400 per sq. ft.


Everyone knows by now that office leasing did slow down in Q3. Cushman issued a report indicating this is the lowest Thrid Quarter office leasing activity since 2001. This did not prevent Amazon’s Twitch from leasing 185,000 sq. ft. at 350 Bush or We Work to lease nearly 80,000 sq. ft. at 2 Embarcadero. Incidentally, there is softening in Residential Sales as well as Retail where a number of establishments have closed shop. More to come on the Residential  slowdown below and for Retail slowdown in upcoming posts. Also, Residential Rents are down and developers stopped building rentals. The doubling of affordable housing requirements makes them stop building condos and focus on hotels: Prop C passed in June requires new projects to include 25% affordable housing. The existing Residential Condos on the Market take longer to sell as illustrated below.


According to a Redfin post looking at August Residential Sales Data, 61% of the current inventory has been sitting for more than 30 days. In other words, no one sells in 10 days any longer and properties need to be marketed and shown for at least 30 days. Rincon Hill was the slowest where the typical home sold within 48 days. The article also points out that Russian Hill prices dropped the most compared to August of last year and almost 9% drop. We have no idea what Russian Hill deserves this faith. Conversely Bernal Heights prices increased by almost the same 9% Russian Hill dropped. This is the table that our colleague Redfin distributed in its newsletter:

Place Median Sale Price Year-Over-Year Homes Sold Year-Over-Year Inventory Year-Over-Year New Listings Median Days on Market Avg Sale-to-List
Ashbury Heights $1,630,000 30.4% 15 -11.8% 4 0.0% 13 18 107.2%
Bernal Heights $1,350,000 8.7% 67 4.7% 30 15.4% 74 14 115.3%
Civic Center / Van Ness $803,763 1.7% 26 -23.5% 25 92.3% 49 35 104.0%
Crocker Amazon $908,000 9.5% 19 35.7% 11 0.0% 21 24 106.7%
Daly City $830,000 13.5% 67 8.1% 108 11.3% 70 25 107.1%
Excelsior $833,000 -0.2% 25 4.2% 14 16.7% 30 16 110.3%
Financial District $1,500,000 -16.8% 5 -37.5% 9 0.0% 12 38 99.1%
Forest Hill $2,285,000 23.5% 5 -44.4% 1 NA 5 13 109.8%
Haight Ashbury $1,269,000 -0.5% 7 40.0% 3 NA 6 20 104.3%
Hayes Valley $1,300,000 -7.3% 13 116.7% 11 22.2% 19 15 105.7%
Ingleside $853,000 -3.1% 17 112.5% 2 -50.0% 16 15 113.9%
Inner Richmond $2,065,000 30.5% 16 -60.0% 8 -27.3% 20 14 110.8%
Inner Sunset $1,355,000 -3.2% 22 -21.4% 14 75.0% 22 19 108.5%
Lower Haight $1,433,000 9.2% 15 7.1% 2 100.0% 10 27 108.0%
Merced Heights $670,000 9.8% 14 7.7% 4 -50.0% 12 26 106.7%
Miraloma Park $1,300,100 -8.3% 43 4.9% 20 122.2% 35 22 107.0%
Mission $1,185,000 -1.7% 39 -11.4% 19 -9.5% 41 24 107.4%
Mission Bay $1,220,000 3.4% 27 -10.0% 23 666.7% 39 36 99.2%
Nob Hill $1,480,000 6.6% 20 -25.9% 17 70.0% 24 32 99.2%
Noe Valley $1,650,000 -10.2% 69 1.5% 21 50.0% 66 25 105.3%
Pacific Heights $1,497,500 0.5% 66 40.4% 27 50.0% 60 22 103.2%
Parkside $1,250,000 5.3% 19 -47.2% 8 0.0% 25 15 117.1%
Portola $850,000 5.5% 9 -55.0% 6 -40.0% 10 44 103.2%
Potrero Hill $1,150,000 -18.0% 45 21.6% 14 180.0% 32 25 105.5%
Rincon Hill $1,225,000 7.5% 33 -15.4% 38 65.2% 52 48 99.4%
Russian Hill $1,285,000 -22.1% 30 11.1% 15 114.3% 28 29 100.9%
South of Market $849,500 -10.6% 68 -22.7% 78 169.0% 110 33 102.0%
South San Francisco $811,250 5.9% 44 22.2% 80 60.0% 51 18 106.0%
Sunnyside $1,060,000 -1.4% 15 -11.8% 8 300.0% 12 20 110.7%
Sunset District $1,250,000 -0.4% 138 -18.8% 54 -6.9% 136 15 115.7%
Telegraph Hill $1,500,000 30.4% 10 0.0% 4 300.0% 9 30 101.4%
Tenderloin $654,000 -18.2% 8 60.0% 5 66.7% 5 40 104.2%
Twin Peaks $1,833,500 101.5% 4 -63.6% 3 200.0% 5 18 101.1%
Visitacion Valley $760,000 4.8% 11 -8.3% 8 -27.3% 12 17 108.4%
Western Addition $1,020,000 -20.9% 16 -27.3% 11 120.0% 22 14 106.5%
San Francisco, CA $1,199,500 -0.0% 460 -0.4% 790 47.9% 427 30 106.6%

Chart courtesy of Redfin

We mentioned above and in previous posts that Commercial, Residential and Retail prices are going down. We also mentioned that Residential Rents are going down. Finally, we mentioned that developers given affordable housing requirements are moving away from building Residential Rentals or Condos. Another interesting wrinkly, with this background in mind, is that Developers are complaining about sub-contractor costs and availability. We often hear that sub-contractors profit margin gone from about 10% to 20% in the last three years which means construction costs must have gone up about 30% perhaps even more if you take into account the increase in the price of materials such as glass etc. In office leasing for example TIs are easily $100 per sq. foot. about 2x what it used to be in years past. In our opinion, both the Residential and Commercial market will continue to go down the only question is whether it is going to be a correction or a sharp drop.

We hear the 85,011 sq. ft. 400 Montgomery office building in San Francisco sold for about $50 million or about $588 per sq. ft.which if true would be a great price for the buyer considering similar assets even recently as you can read in previous posts trade close to $800 per sq. ft.



Our friends at FAIS proposed a 300 foot tower at the site they own at 98 Franklin. The project calls for Residential over School facilities (about 70,000 sq. ft.) and Retail. We find the benefits of such a project enormous for the neighborhood and have no doubt it will be approved.

We think that building over historical structures or even other structures will be very hard moving forward. Planning recommended against a tower on top of the Wells Fargo Bank at 1 Montgomery. Swig is back to the drawing board after Planning and Residents criticized its plan to build over the building it owns right next to Blu on Folsom Street. We bet that nothing will be built on top of the old Passport Agency across the street on Folsom. Our opinion is based on anecdotal evidence and a belief that it makes more business sense for a City to direct development to underutilized parcels and neighborhoods in needs of gentrification. At the same time, we think that political moratoriums restricting changes of use need to be eliminated immediately because they harm the neighborhoods affected. In other words, it is best to incentivize developers to build in areas that need gentrification rather than on top of existing structures in developed areas. It will be interesting to see if the structure planned on top of the Macy’s store will be approved: Macy’s sold its 263,640 sq. ft. building for $250M or about $950 oe sq. ft. In case some of you wonder why this is higher than office buildings in the Financial District and elsewhere the short answer is that some sub-markets like Union Square or even South Park command a premium.


The 117,000 sq. ft. office building over Retail (Blue Bottle and Treasury) at 115 Sansom sold for $83M or $709 per sq. ft.




88 Bluxome the 369,000sq. ft. site of the SFTC sold for $140M or  $379 per sq. ft.



950-974 Market will be 242 condos and 232 hotel rooms.


Here’s what happened in the SF Residential and Commercial Real Estate Market since 8/1:

Amazon’s Twitch leased 185.000 sf at 350 Bush which is not yet built. Amazon paid only $62 per sf per year and will receive TIs rumored to be $65.

123 Mission St. a 346,000-square-foot office building  sold for $255 million or about $736 per sf.

Twitter is sub-leasing close to 200,000 sf.


Macy’s is closing 100 stores and selling the 263,640 sf Union Square store. Saks is also quietly marketing the Men’s store at 220 Post…Regarding the sales price for either one, your guess is as good as ours. It will probably go for more than $1000/sf but Macy’s Union Square give its unique location may go for more…


The Central Soma Plan about 260 acres between 2nd and 6th and Market and Townsend is being up zoned and the big name developers have purchased a considerable amount of real estate despite the fact that Plan is only a draft as of now. Developers hope to get approval for upzoning of residential and commercial projects. Anything from condos to rentals to hotels etc. San Francisco is seeking over $2 billion in fees from developers for 7800 affordable housing and market rate units. All the specifics are not yet known and will most likely change but for now here’s some:

  • Residential projects would have to provide between 16 percent to 18 percent affordable housing on-site, or between 28 percent to 33 percent affordable housing off-site.
  • Taller residential projects that are 90 feet or higher than current zoning would also pay annual fees of $6.44 per square foot for condos and $2.59 per square foot for rentals. All residential projects would also pay a one-time $1.30 per square foot community facilities fee.
  • Commercial projects between 15 and 85 additional feet would pay fees of $15.55 to $35.50 per square foot.
  • Commercial projects of 90 feet and more would pay $3.75 to $24.50 per square foot, along with an additional annual fee of $.48 per square foot each year.
  • All commercial projects would have to provide a half-floor of production, distribution and repair (PDR) space, for light manufacturers and artists.

 The money will most likely also help build infrastructure such as hopefully parks, sidewalks etc.

A hotel and condos or rentals is proposed on top of the Wells Fargo Crocker Branch at One Montgomery. Prop C mandates that new residential construction of over 25 units must have either 25% affordable/market rate housing or that developers pay a fee equal to 33% of the units value and that’s why we see this type of proposal…


JLL is pitching 55 Hawthorne for about $125M and the owners are completing a new roof deck. The 143,000 sf building which is office over 300 parking spots should fetch about $850 per sf. Other buildings in play are 600 California, 655 Montgomery, 100 Pine, 150 Spear…

1075 Market Condos will be built soon on the site of the former Porn movie theater: Market Street Cinema. The majority of the 44 units will be 1 bedrooms.

Another effect of Prop C. The parking lot at 350 2nd right across the street from Kilroy’s 303 2nd will be the site of a 278,000 sf hotel over retail and public open space if the project gets approval.

 220 Post the building that houses the Sak’s Men’s store sold for $70M, at 38,400 sf the sale translates to $1,823 per sf….


Summer is slow. Here’s what happened in the SF Residential and Commercial Real Esate Market since 6/22 :

Parcel F aka 546 Howard, San Francisco’s last public development site in the Transbay district and zoned for another tower sold for $160 million. It is zoned up to 750 feet. It could become a mixed use project i.e. hotel+condos+office space. Note that the tower must have 15% affordable units.

Chinese company Shanghai Lingang Economic Development was the buyer of of 755 Sansome, a 58,000 sq. ft. building for $42.6M or $734 per sq. ft.

Transbay so far costs over $2.3B and all parcels have brought in so for a little over $714 M.

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Here’s what happened in the Residential and Commercial San Francisco Bay Area Real Estate Market since 5/9:


Our friend Xavier Niel is duplicating his highly successful Coding School based in Paris in Sillicon Valley. 42 will open inn Fremont where 42 purchased 100,000 sf at 6600 Dumbarton Circle and 84,000 sf at 34,793 Ardentech for $26.2M. Fremont is becoming a hot market.


Reddit under Ohanian leased 50,000 sf at 420 Taylor. Reddit is thought of paying $62 per sf per year.


424 Mason will be a hotel. More to come.


181 Fremont is an 802 foot mixed use building we have discussed many times here and full disclosure we are actively marketing the 55 condos that are part of the project. 2 BR 2 BA are about 1200 sf and starting in the low $3M. 3/3 will be in the mid $6M or from $2400 to $4500 per square foot. The 7,000 square foot Penthouse which we have marketed is not priced but we indicated to clients it should go for around $35M. There are also 12 1/1 but they owners of the 2/2 and 3/3 have first right of refusal to purchase them. Whatever is left may be opened to the public. If you add those there will be a total of 67 units. The condo part is starting at 520 feet which is almost at the same height as the Millennium. It sits on 435,000 sf of class A office space that our friend Carl Baldauf is marketing. Note that it took a year to dig over 60 feet below surface to anchor the structure to bedrock.

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The 284,800-square-foot office building at 353 Sacramento in San Francisco sold for $169.5 million  $595 per sq. ft. plus closing costs.


The 191,000 sf Adam Grant Building at 114 Sansom Street is in play and asking $155M or $811 per sf.


The 303,250 square foot 180 Montgomery Street sod for about $179 million or $590 per sf.


333 Valencia Street with 51,299 square feet of office space and 11,000 square feet of retail space is in play.


The 720,000 square foot Market Center office building at 555 and 575 Market Street is selling for $680 per square foot or $489.6 million.


Park Tower at Transbay 751,500 square feet not pre-leased.


The Exchange at 16th 740,000 square feet not pre-leased.


350 Bush St. 432,975 square feet not pre-leased.


181 Fremont St. 432,094 square feet not pre-leased.


100 Hooper 408,000 square feet not pre-leased.


Secondly, 271 sublease spaces adding up to  1,620,000 square feet pushing prices down.


Finally, here’s some recent leases:


150,000 sf at 999 Brannan St. by Airbnb.


Quantcast 94,988 sf at  795 Folsom St.


72,963 sf at 600 California St. for WeWork.


Bain & Company, 69,489 sf at 415 Mission St.


60,000 sf at Pier 70 for Restoration Hardware.


58,290 sf at 365 Main St. for Twilio.


Uber 48,876 sf at 1455 Market St.


45,000 sf at Pier 70 for Tea Collection.


Spirit, 1160 Battery St.43,438 sf.


28,277 sf at 525 Market St. for Sephora USA, Inc.


and recent sales:


JPMorgan Asset Management purchased 1355 Market St. 1,046,148 sf for $917,427,000 or $876.96.


Again for those who like numbers, office occupancy in SF is about 8% and unemployment is about 3%.


The unentitled site at 469 Stevenson and 6th Street is a 30,665 square foot site that is offered for sale. Zoned C-3-G it could be residential, hotel or office or even retail. It is now a parking lot. It can rise up to 160 feet.


The 128,000 square foot 115 Sansom Street office building in San Francisco’s Financial District which houses Blue Bottle is for sale and ownership is looking for $700 per square foot or $89.6 million.



Here’s what happened in the SF Residential and Commercial Market since 3/10/16:

Back by popular demand:

Terms Meaning
Base Rent The minimum monthly rent due under the lease; usually computed on a per- square-foot-per-year basis.
Base Year First year of the lease.
Build-Out Refers to the interior construction of a tenant’s space whether new construction or the reconfiguration of existing space.
WHO PAYS COMMISSIONS? Keep in mind in most cases Sellers and Landlords pay commissions to both procuring and listing Brokers.
Common Area Maintenance (CAM) An additional, annual charge often assessed to tenants for maintenance of the property’s “common area”.  Includes interior items; entryways, hallways or bathrooms, and exterior items; parking areas, grounds and exterior painting.
Cost of Living Increases Increase to base rent tied to increases in US Department of Labor Consumer Price Index (CPI).
Consumer Price Index (CPI) A measure of inflation as determined by the US Federal Government by using a “basket of goods”. Used in leases as an impartial benchmark for the calculation of escalations.
Effective Rent Equals contract rent less free rent and any cash allowances such as a lease buyout or moving allowance. Escalations written into the lease are included in the calculation of effective rent. Tenant improvement allowances and brokerage commissions are not subtracted from the contract rate in calculating effective rent.
Escalation Leases often include escalations or stepped increases in rent to be paid by the tenant to the landlord at a specified future date.  This can be annually, for example, year five of a 10-year lease, or set to an index such as CPI.
Full Service Lease Lease type in which landlord pays all expenses including taxes, utilities, janitorial, etc. in the base rent. Tenant pays increases in operating expenses over the base year.
Gross Square Feet Usually refers to gross area of a building by measuring from the outside of its exterior walls and including all vertical penetrations, such as elevator shafts. Also includes basement space.
HVAC Acronym for heating, ventilation and air conditioning.
Industrial Gross (IG) Lease Lease type in which tenant pays most but not all operating expenses in the base rate. In addition to base rent, tenant pays utilities, common area maintenance, and often the increase in property taxes and insurance over base year.
Industrial Space Space in buildings zoned for industrial uses.  Not available for office use unless a change of use permit is filled and approved by the planning department.
Lease Type of legal agreement establishing a property owner-tenant relationship.
Lease Commencement Date Date upon which the lease commences and the obligations of the parties begin (see also “rent commencement date”).
Lease Term Length of the lease.
Leasehold Improvements Construction or improvements for the purpose of preparing the premises for the conduct of tenant’s business. Improvements permanently attach to the premises unless they are trade fixtures, and they remain with the premises after the end of term of the lease.
Lessee Tenant.
Lessor Rental property owner or landlord.
Load Factor The amount of square footage in a lease, in addition to a tenant’s usable square footage, which represents tenant’s pro rata share of the building’s common area/s. May also be referred to as a percentage of building’s rentable square feet.
Office Space Category Office space is loosely categorized based on the quality of construction, features and the status of location:
Class A. Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence.
Class B. Buildings competing for a wide range of users with rents in the average range for the area. Building finishes are fair to good for the area and systems are adequate, but the building cannot compete with Class A at the same price.
Class C. Buildings competing for tenants requiring functional space at rents below the area average.
Operating Expenses Costs associated with income producing property usually before interest and income tax expense, but including property taxes, insurance, repairs and maintenance, replacement reserves.
Pass-Through Expense An expense associated with tenancy in which landlord “passes through” to tenant certain increases in building operating expenses occurring after a base year in the lease.
Permitted Uses Check with City to see what’s allowed at the location.
Quotas A zoning system overseen by the City of Berkeley where only a specific number of certain uses are permitted in the district at any one time, and some of these uses are also subject to square footage limits. Quotas are in effect in the Elmwood, Telegraph Avenue and Solano Avenue areas.
Real Property Taxes Taxes due on building and structural components.
Renewal Option Lease language that provides the means for tenant to give landlord notice of its intent to renew (extend) the lease.
Rent Basis Designates what operating expenses are included and excluded in the rent. The most common rent bases are:
Full Service: All costs of operation are paid by the landlord up to a base year. Tenant pays increases in operating expenses over the base year.
Triple Net (NNN): All costs of operation including, but not limited to, real estate taxes, insurance and common area maintenance are borne by the tenant on a pro rata basis.
Modified Gross (MG): any arrangement whereby the tenant pays one or more of the expenses covered by the landlord in a Full Service lease, but not all of the expenses as in a Triple Net lease. Modified Gross leases cover a range of lease types and terminologies used in various markets around the nation. Some of the more common are Industrial Gross, Single Net and Double Net. The definitions of these bases vary from market to market depending on the expenses they include or exclude.
Net of Electric: A popular form of Modified Gross, this is like a Full Service lease, but the tenant pays for his or her electric charges either to the utility company (according to a meter) or to the landlord on a pro rata basis.
Rent Commencement Date Date upon which the rent and usually the term of the lease begins. May be different from the lease commencement date when certain obligations must be fulfilled such as the construction of tenant improvements.
Rentable Area Denotes the number of square feet in a commercial building deemed to be rentable. May include a common area load factor or allowance for building amenities such as hallways and lavatories.
Retail Space generally reserved for retail use.  May also be available for office use.
Security Deposit Deposit of money by a tenant with a landlord to secure performance of a lease.  Generally equal to one month of rent.
Setback Zoning requirement that requires a building or an improvement to be set back a certain number of feet from the property line.
Sublease Sublease space is offered on the market by the current tenant for sublease, regardless of whether the space is occupied or vacant. Often a sublease tenant is subject to landlord approval.
Triple Net (NNN) Lease type in which the lessee pays for its share of the property’s taxes, insurance, common area maintenance, and their own  operating expenses.



Here’s what happened in the San Francisco Bay Area Commercial and Residential Real Estate Market since 2/10:


The Hines Salesforce tower is 60% leased. We hear that everyone except Salesforce is paying about $100 per square foot per year. Salesforce leased the bottom half.


A condo or apartment tower consisting of 330 units will be built at 95 Hawthorne site of the SF passport agency almost across the street from Blu.The  corner of Folsom and Hawhtorne by the Riverbed building is getting a lot of new developments assuming of course the market does not correct. 655 Folsom will be about 90 apartments over commercial on the site of Canton Seafood is also in the plans along with a condo project on top of the Hines building which is adjacent to Blu.


The Central Soma Plan has not yet been approved despite the fact that all major developers have purchased parcels hoping they will be able to raise height limits. If the real estate market corrects many of these projects will not be economically feasible to build and the question will be what are developers going to do with those lots?


Many of us who have dealt with Federally owned leases or fee simple properties have been particularly frustrated. For example, we tried to lease the vacant cafeteria of a building owned by a prominent East Coast developer in SF. The developer was very helpful but indicated the property was part of a Federal Lease. We approached the GSA Office in SF who was very helpful as well and set up a meeting with all Federal stakeholders. One entrenched Federal Agency’s rep refused to let us lease the property despite the fact that it has been vacant for years and argued that priority for running the space should be given to a Federal agency helping the blind. No one dared argue how the blind could run a cafeteria. Needless to say, we were delighted when congressman Jeff Denham introduced HR 4465 to make the Feds sell vacant or underutilized properties. We are tracking the bill and will share update with you.


The Transbay Transit Center had some setbacks. One was the fact  that none of the contracts assigned the cost of maintaining the gardens to a group. Developers refused to pay indicating it was not part of their contract. Someone at City Hall dropped the ball and we have yet to find who the person is and who will pay for the maintenance of the gardens. This is akin to the person at City Hall who did not charge the NFL any impact fees for the Super Bowl. BTW, the Mayor refuses to divulge the name of the individual(s) even when pressed by Aaron Peskin… Now we that Transbay is borrowing a $171M as a bridge loan which will cost taxpayers $37M. Phase 1 of the Transbay is very late and well over budget. There is tremendous money coming in to the coffers of SF from parcel sales, property tax, sales tax, hotel tax, business tax etc. and it is hard to understand how Transbay can be so much over budget. To be fair, the cost of materials has gone up but not enough to explain the project’s cost and why SF is struggling with money for this project in the the middle of the biggest economic boom the City has experienced. We would love to hear thoughts from City leaders and readers here about this issue.


Oakland Office Rents are now as high as $50 per square foot per year which explains why the 228,000 sq. ft office building at 2150 Webster is selling for an undisclosed sum for now.


The area around the End up and Clara street in SF has never been appealing but the 100 unit condo building approved for the site at 988 Harrison directly across the End up may “end up”changing this. You will notice that several homeowners on Clara street are remodeling their homes…


63 condos over 8,000 square feet of commercial space will be built at the corner of California and Polk (1567 California) almost directly across the Lumiere Theater.


247 condos+ a 200 room hotel over commercial will be built by the Warfield Theater on Market and Taylor.


35 Dolores is the site of a condominium which faces construction defects litigation following water intrusion (35 units). This type of litigation is very common with new properties. It has been our experience on other properties that often sub-contractors do not align windows or pour concrete properly on decks resulting in water intrusion. It would make business sense to have this phase of construction closely supervised by a team of SWAT project managers because it is the source of so much litigation but we haven’t seen that anywhere. Some think it is a good investment to purchase units in a building that is in litigation if you find a lender willing to lend because you get a steep discount.


2000 Franklin in Oakland is selling for $400. It is a 33,000 square foot class B building. We will follow up with the exact price after the deal closes. 3300 Webster sold for $45o per square foot and Uber’s HQ sold for $325.


875 Howard Streets lower floors will be office space soon about 30,000 sq. feet will be available. 899 Howard is just the opposite: the top 2 floors of the Burlington Coat factory will be office space.


Zynga is selling its 670,000 sq. ft. headquarters at Townsend and 8th. Zynga could potentially triple its money since it paid $228 million or $340 per square foot.


Gagosian Gallery is opening across from Moma May 18 on the Ground floor level of Crown Point Press and John Berggruen will be co-located in part of the space  Roe Bar has vacated in the same building. Full disclosure, our Brokerage dealt  with Larry’s rep and John  when we were selling 667 Howard. The Gagosssian move is very significant for SF. SF is considered a B market for Art well behind NY and LA: It is a fact that most well known artists live and work in NY where Gagossian started his first gallery. It is also a fact it is hard to find good art in SF despite great SF Art Buyer demographics. It is very likely that this is all going to change because of Gagosssian’s opening. Larry Gagosian has built the best and largest gallery in the world. He has 16 locations around the world and represents the best artists and collectors in the world. It is fair to say that not one major work of Art trades without him being somehow involved in the transaction. Larry Gagossian is also a self-made man. Legend has it that he used to sell posters on the parking lot of UCLA in the  70’s before he moved to NY and started working with another mythic figure who revolutionized Art dealing: Leo Castello. Larry Gagossian is widely regarded as Castelli’s spiritual heir. If SF if mindful not to destroy the area around the new SFMOMA where Gagossian and Berggruen are located it will become the new Art district in SF very much like Union Square was 30 years ago. To that end, SF would be well served to work on traffic congestion and pollution problems that plague the area. There are too many cars going to the Bay Bridge or into SF during commute hours and especially event. It is urgent for SF to implement congestion pricing and act like the world class city that it could be.


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image: Gagosian gallery

Transbay finally sold  Parcel F at 546 Howard Street for $160 million. It is the last available parcel and is located on the lot right next to the old DV8/Temple night club. Plans change all the times but the latest is a mixed project which is the latest trend: hotel+condos+office+retail. After all, the site is zoned for 750 feet.


Market and Sanchez will be 14 condos over commercial.


SF’s  3 most pressing issues in our opinion are homelessness, cost of public employee pensions and traffic congestion. Regarding traffic congestion we firmly believe congestion pricing will solve the issue and its direct side effect Chinese grade pollution. There are some efforts by SFMTA to address the problem. It is not enough but it is a start: redirecting Freeway traffic away from 2nd street to prevent congestion.


Not much happened in SF Real Estate in December and even January. The market picked up the first week of February.  Here’s what happened in the SF Commercial and Residential Markets since…12/18:


Prices of SF Commercial buildings vary quite a bit even in the same sub-market and the best thing to do to get feel for the going rate is to access as many sales as possible and we go out of our way to publish any recent sales such as the office space at 1340-1370 Mission which at 47,000 sq. ft. sold for $25M or $528 per sq. ft.


We really like the future design of Pacific Eagle’s upcoming 100 condos at 1545 Pine corner of Pine and Polk.

Rendering courtesy of Pacific Eagle Holdings Corporation.

PE is also developing 555 Howard a tower condo next to the Melt on Howard and facing Transbay.

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Another building is planned by a different developper at 1433 Bush St. and yet another at 1033 Polk.



Tenants often ask us to explain NNN, load factor and other arcane terms. First, Brokers sometimes have different interpretation of such words and we like to preface any negotiation by defining what our understanding of terms are so as to avoid any miscommunication. Load factor aka as efficiency is the percentage of the building that includes common areas but excludes outside areas and stairs and elevators. Is it a good idea to understand what your usable square footage is and what your load factor is? If you rent in SF in a class A building the load factor is about 30%. Armed with this information, can you argue that you will only pay for usable square footage, that the lobby is of no use to you? . Even if you rent a full floor without corridor you will still pay for the lobby’s load factor.  It will be a tough fight not to especially in an up market and the building owner and her agents may appreciate you understand what the load factor is but they will certainly argue that all other tenants pay it and that common areas enhance the building for everyone (a grand lobby makes a great impression on all visitors). In our view, what really matters is to measure the space you are about to lease and base the price per square foot on usable footage and negotiate a break in price there if you can. Also, as mentioned in previous posts, you should ask for what is included in the NNN. You may find that an owner includes advertising expenses and other borderline Nets in the NNN they charge. There would be room for negotiation there as well. Finally, it is worth considering Class B buildings which often do not have NNN. However,that does not mean that you should assume the Common Area Charges in a Class B building are nothing to worry about. For example, chances are that even in a Class B building, Property Tax Payments are divided pro-rata among tenants. Consequently, if Owner sells the building, the new owner will pay property taxes based on the purchase price which will be much higher than what owner paid for and tenant’s will have to pay a higher pro-rate share of property taxes. A good way to avoid that is to simply have your Broker negotiate a Prop. 13 protection or even a cap.


October actuals Residential Case Shiller shows that SF is less than 1% of the all time high in homes and Condos are 17% over the all time high.


950 Gough which is the plot of land right behind the Church on Gough as you drive down towards market is going to be 97 Condos over Commercial.   We never thought the Van Ness Corridor would become gentrified but it is becoming a reality. We would love to see trees on Van Ness from the water all the way down to Market which will beautify the avenue and complement the gentrification.


It is no secret that we strongly advocate congestion pricing  as a way for SF to solve traffic congestion and related pollution problems. SB 743  will look at the traffic impacts of construction projects with an emphasis on congestion, pollution, noise, safety. This is going to be a game changer for developers and municipalities. We encourage you to Google and follow SB743. Here’s a summary taken directly form

Governor Brown signed Senate Bill (SB) 743 (Steinberg, 2013), which creates a process to change the way that transportation impacts are analyzed under CEQA. Specifically, SB 743 requires the Governor’s Office of Planning and Research (OPR) to amend the CEQA Guidelines to provide an alternative to LOS for evaluating transportation impacts. Particularly within areas served by transit, those alternative criteria must “promote the reduction of greenhouse gas emissions, the development of multimodal transportation networks, and a diversity of land uses.” (New Public Resources Code Section 21099(b)(1).) Measurements of transportation impacts may include “vehicle miles traveled, vehicle miles traveled per capita, automobile trip generation rates, or automobile trips generated.” (Ibid.) Once the CEQA Guidelines are amended to include those alternative criteria, auto delay will no longer be considered a significant impact under CEQA. (Id. at subd. (b)(2).) Transportation impacts related to air quality, noise and safety must still be analyzed under CEQA where appropriate. (Id. at subd. (b)(3).) SB 743 also amended congestion management law to allow cities and counties to opt out of LOS standards within certain infill areas. (See Amended Government Code Sections 65088.1 and 65088.4.)


1221 City Center in Oakland a 521,177 square feet office building is for sale and we are eagerly awaiting to find out what the sale price per square foot is going to be…


1640 Broadway in Oakland is going to be the site of a 30 floor tower with at least 200 units over Commercial and most likely condos.


Everyone leasing office space in SF realizes there are a lot of subleases out there. A figure we keep reading out is that 3% of the total office supply is sub-lease. We think it is much higher  but can’t find data other than anecdotal evidence to support our claim. Feel free to share your data.

Restoration Harware  is the anchor tenant of the Pier 70  Development right next to Dogwatch. Orton signed the master lease with the Port and is looking at 8 buildings over 7 acres, at least 1000 housing units and offices. Needless to say with RH they are off to a good start.

You Tube purchased the former Equity office near its San Bruno HQ for $215M or $388 per square foot at Bayhill Office Center.

Dolby moved last year to 1275 Market street and is leasing its former office at 999 Brannan across Trader Joe’s. It consists of 150,000 sq. ft. We hear Airbnb will take it and move out of the Burlington Factory Building.

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