In an encouraging sign for the office real estate amidst the ‘everyone's working from home forever’ craze, the four-building Mission Bay complex known as the Exchange has sold for $1.08 billion.
A who’s-who of big-name SF tech companies have been trying to unload their office space and sublease much of their square footage during these COVID-19 times, and it’s fair to wonder whether the commercial real estate market will ever really rebound as work-from-home policies are becoming unofficially permanent at so many firms. But even as companies rethink whether they really want to pay the astronomical sums on the leases they signed, it would appear that the property itself still has great worth. That’s the conclusion we can draw as the Chronicle reports that the Dropbox headquarters buildings centered at 1800 Owens Street (at 16th Street) has sold for just over $1 billion.
That’s the second most expensive building sale ever in San Francisco, behind the 1998 sale of the Embarcadero for $1.2 billion. But it’s well over what the Transamerica building fetched last year ($700 million), and at $1,440 per square foot, it’s the highest price per-square-foot of any transaction in SF history.
The buyer was not disclosed in Kilroy Realty’s announcement, but the Chron reports that “A source with knowledge of the deal who wasn’t authorized to speak publicly said it was KKR, the private equity giant.”
Dropbox had been the sole tenant but they leased the whole place in 2017, a move that like most office space leasing companies, they’re trying to wriggle out of a bit. They did manage to sublease just under 135,000 square feet Vir Biotechnology, but that’s not even half the amount of space they trying to sublease.
And yes, the Prop I real estate tax measure that passed in November does apply here, so the real estate transfer tax is indeed double. (And as the Chronicle points out, Kilroy Realty did contribute $225,000 to oppose Prop I). This is only one transaction, but does indicate that the real estate tax isn’t scaring buyers off, and that companies are still interested in buying up commercial properties.
Image: Kilroy Realty