After years in which San Francisco’s commercial real estate market appeared to be in hibernation, it seems to be waking up again. And it appears to be changing.
Quiet city
Six years ago, the commercial real estate market in San Francisco was red hot. Many properties were owned by national or international investment firms that rented out office space to tech companies, financial firms and other businesses at often-exorbitant rates.
Then came the shocks of 2020. Since then, as many have remarked, the Financial District has seemed eerily quiet. Some of the city’s high-profile tech businesses left town — or even the state — and those that remained let their employees work from home. Many businesses decided they didn’t need as much space as they used to, and so let their leases expire and moved to smaller digs.
The big investment firms saw their office properties go vacant and waited for things to turn around. In many cases, they paid top-dollar for office buildings and hoped to get some return on their investment.
Now, it appears many of these firms have decided to cut their losses. In recent months, they’ve started selling off some prime Financial District properties.
And, some reports indicate, the buyers are not necessarily other big investment firms. In many cases, the buyers are owner-users — meaning they are businesses that intend to use the premises for their headquarters. A few years ago, these companies would not have been able to afford their own buildings in San Francisco, but now that prices have fallen a bit, those that can afford to own their own buildings are taking advantage of lower prices.
Signs of things to come?
It’s probably too early to say whether we’re seeing the beginnings of a long-term trend, but these changes represent an encouraging sign for anyone who does business in San Francisco real estate.
Of course, by most people’s standards, prices — both for buying and leasing — remain high. Risk remains high, as well. The Financial District market could bounce back, but it might not, or it might not bounce back quickly enough for some investors.
This means it could be a good time to buy or lease San Francisco real estate, but it’s important to protect yourself legally and financially by seeking out experienced advice.