Video Recap of Bisnow's San Francisco State of the Market

Wilson Meany managing partner Chris Meany talked about the 83-acre mixed-use Bay Meadows in San Mateo (infrastructure is 90% complete) and 280k SF 140 New Montgomery (60% leased). In renovating 140 New Montgomery, the company is aiming for a creative feel (high ceilings, creative amenities), “but one that is very efficient so that it can actually attract adult tenants.” San Francisco will never be a low-cost alternative, he says, so it’s important to understand that “we need to offer better products” and keep our educational institutions plugged into the local businesses.

Shorenstein has been a more active seller than buyer, according to CIO Charlie Malet, having sold $3.5B worth of real estate over the past two years. Buying anything in San Francisco has been tough— when there’s 10 or 15 other groups bidding "we generally won’t win that auction." Its recent deals favor the "askew," where it can distinguish itself by taking on more risk, get financing when others can’t, or buy at all-cash. Look at 801 Gateway, a 100% vacant building in South San Francisco. Also, other than Market Square, the company doesn’t have the type of product that has a huge tech exposure but takes a pretty hard line on security deposits.  

Hudson Pacific Properties SVP Drew Gordon says his company tries to keep a balance of 60% core and 40% value-add. If it can't find core deals, Hudson’s looking in other markets like Silicon Valley, although the market there is in “different cycles based upon what block you’re on.” He says San Francisco’s dynamic change “is being witnessed firsthand” at Hudson’s 1455 Market St property. BofA is vacating the building, and the space is being backfilled by electronic payment service provider Square, an upstart company that’s competing directly against BofA’s credit card business. That said, letters of credit are one of the first discussion points.

Cushman & Wakefield senior director Grant Lammersen sees shades of ’06 and ’07: shorting due diligence, going hard quickly, and pushing price. This last cycle introduced the super-core—“the 555 Missions of the world, where there’s really nothing to do… and it’s a safe haven.” He says there’s still a lot of room to run in terms of rental rates. A 100k SF tenant that needs to have butts in seats by the end of next year has about half a dozen options, and demand will continue to grow. “If you start getting some FIRE-type growth," there'll be a long run in front of us.