SF New Developments

by J.K. Dineen and Ryan Tate

Investors pumped more than $5.5 billion into San Francisco office buildings during the first quarter, a number that easily surpasses the entire sales activity for both 2005 ($4.3 billion) and 2006 ($3.8 billion). And it’s not going to slow down any time soon.Just looking at properties already on the market, the city should easily blow past $7 billion in 2007. And if more owners jump in to take advantage of the unprecedented pricing, we should surpass $8 billion, according to a Grubb & Ellisquarterly report.”This could be the record to beat all records,” said Colin Yasukochi, research director at Grubb & Ellis.

Although it’s not clear what One Market Plaza actual sold for when Morgan Stanley bought it from Blackstone, brokers involved in the bidding say it was priced just under $1,000 a square foot. The entire 3.9 million-square-foot portfolio averaged over $750 a square foot.

And now the asking rents are beginning to reflect the new pricing reality, with space on the top of One Market going for $90 a square foot.

“Many of the new investors strongly believe that rents are undervalued and they can be raised dramatically,” said Yasukochi. “Only time will tell if they are right.”

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