You Won't Believe the Fire Sale Price on This San Francisco High Rise

San Francisco Financial District. (Creative Commons Attribution-Share Alike 3.0.)

Arguably the most beautiful big city in America looks more and more like a ghost town as San Francisco learns yet another painful real estate lesson.

The Wall Street Journal reported Thursday that a “fire sale” on the 22-story 350 California office tower could see the $300 million building sell for as little as $60 million.


The potential 80% off is because the building is 75% vacant and, according to one estimate, will require $50 million in renovations and improvements to attract new tenants.

Assuming there will be any tenants to attract.

“We’re all really on the edge of our seats to see the first office trade in San Francisco,” real estate services executive J.D. Lumpkin told the WSJ. A real estate lawyer warned the paper that the 350 California fire sale could prove “a bellwether for the value destruction in the urban office market nationally,” and not just for San Francisco’s (formerly?) ritzy Financial District.

To blame are high-cost structures based on pre-pandemic valuations, the local tech industry’s embrace of remote work, and what some people euphemistically call “quality-of-life issues.” That’s what honest people call “aggressive panhandlers, violent crime, and open-air drug sales and abuse.” Oh, and sidewalks festooned with poop and dirty syringes.

I worked in downtown San Francisco 30 years ago, and I always carried an open pack of budget-brand cigarettes to hand out to the homeless instead of cash. A cigarette would keep even the most aggressive panhandlers at bay, but these days you probably need a flame thrower.

Out of curiosity, I looked up Shaklee Terrace — now known as One Front Street — the downtown office tower where I once worked. Sure enough, it made the news just this week, and not in a good way.


San Francisco-based First Republic Bank announced Monday that it’s slashing up to a quarter of its workforce and cutting way back on the office space it leases downtown. “Real estate sources say its space in San Francisco totals 750,000 square feet,” according to Business Journals, including the “company’s biggest lease in the city” at One Front Street. First Republic leases an estimated two-thirds of the building’s office space. With San Francisco’s office vacancy rate already one of the nation’s highest at nearly 30%, First Republic’s office closures could gut whatever value is left at One Front Street.

The timing could not be worse, either.

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According to the Journal, nearly “$80 billion worth of loans backed by U.S. office buildings come due this year,” and “most will need to be refinanced, at a time of higher interest rates and lower occupancy, threatening lenders with losses.”

Imagine you borrowed money to finance a duplex you’d rent out for extra income. Except now you can only find a single renter, and you have to re-fi the mortgage at 6%, up from 3%.

Vacancy rates were already at record levels due to overreaction during the COVID-19 pandemic. But the lousy economy and tech layoffs created a second wave of closures and sublets that flooded a market for office space that already had too much supply and rapidly shrinking demand.


Add it all up, and it makes me wonder, not how little 350 California might sell for, but if there’s a buyer for it at all under current market conditions. The purchase price, plus another $50 million in renovations and improvements, is an awful lot to risk for a Financial District increasingly bereft of financiers.

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