The Blubber

Prior to the COVID-19 pandemic, California Street in San Francisco was a prime location for high-value commercial properties. Situated in the city's financial district, the street was lined with office buildings housing banks and other firms that played a key role in the global technology sector.

One such property, a 22-story tower located at 350 California Street, was estimated to be worth approximately $300 million in 2019, as per commercial real estate brokers. However, the same building is now on the market, and the anticipated bids are expected to be around $60 million—a staggering 80% drop in value over four years.

This situation exemplifies the challenges faced by San Francisco, which are also present, albeit to a lesser extent, in other major US cities. The shift to remote work during the pandemic has led to a decrease in office occupancy across the country. San Francisco has been particularly affected due to factors such as high living expenses, a tech sector that readily adopted hybrid work models, and social issues like crime and homelessness.

Prominent companies based in the city, including Salesforce Inc. and Meta Platforms Inc. (formerly Facebook), are opting to sublet their office spaces rather than wait for lease agreements to end. The absence of office employees has had a domino effect on the financial district, with restaurants, retail stores, and small businesses experiencing layoffs and closures.

San Francisco's office vacancy rate has soared to nearly 30%, over seven times the pre-pandemic rate, marking the largest increase among major US cities, according to CBRE Group Inc., a commercial real estate services firm.

The current value of office properties in San Francisco's financial district is uncertain, as transactions have become scarce. The sale of the building at 350 California Street is expected to set a new benchmark for pricing in the area.

J.D. Lumpkin, executive managing director at Cushman & Wakefield, a real estate services firm, expressed anticipation for the outcome, stating, "We're all really on the edge of our seats to see the first office trade in San Francisco."