Two office buildings in San Francisco traded for tens of millions less than they did a decade ago.

Ellis Partners and Flynn Properties snapped up a 10,000-square-foot office building in San Francisco for $35.6 million – more than $26 million less than the sales price in 2014, IPE Real Assets reported, citing unnamed sources.

The local investors bought the nearly century-old building at 631 Howard Street in the South Financial District. The sellers were Invesco Real Estate of Atlanta and ASB Real Estate Investments of Maryland.

The deal is valued at $327 per square foot.

Investco and ASB bought the four-story building in 2014 for $62 million, or $570 per square foot.

Built in 1929, the Art Deco building was listed in a JLL brochure as a “first-class creative office” with open floor plans, modern amenities and abundant natural light.

The building is fully leased to SC Johnson & Son and Finix until September next year. Rents paid by tenants were not disclosed. Ellis Partners declined a request for comment from IPE, a website for institutional real estate investors.

Fountainhead Development also signed a great office space deal, IPE reported, citing another unnamed source.

The Alaska-based investor bought a 180,000-square-foot building at 795 Folsom Street in South of Market for $46.8 million, or $250 per square foot. The six-story building is 33 percent occupied.

The seller was ASB Real Estate, which sold the property for $63.2 million less than it paid eleven years ago. ASB bought the property in 2013 for $110 million, or $588 per square meter.

The Ellis-Flynn and Fountainhead purchases are part of other office purchases in San Francisco that are in the price range of about $300 per square foot.

Late last month, Irvine-based LBA Realty bought a loan tied to a 182,000-square-foot, 14-story office building at 255 California Street in the Financial District. The deal was for $300 per square foot, a third of the property’s 2019 sales price.

In April, local firms Redco Development and GCI bought 300 California Street, a 119,000-square-foot office building, for $28 million, or about $240 per square foot. Last month, Redco was in negotiations to buy an 85,600-square-foot office building at 400 Montgomery Street in the Financial District for $26 million, or $300 per square foot, a third of the price it paid five years ago.

San Francisco’s office market has been hit hard by the widespread shift to remote work, higher borrowing costs and construction defaults. According to CBRE, the vacancy rate is at a record 37 percent.

According to IPE, Capital Economics had predicted a 40 percent decline in capital values ​​in the San Francisco office market between 2023 and next year. Local real estate companies see this as an opportunity.

— Dana Bartholomew

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