Vacant properties in downtown San Francisco are snapped up by investors at heavily discounted rates.
A surge in crime and homelessness in the area led to a mass exodus as businesses and residents gave up hope of a resurgence.
Office vacancy rates fell to an all-time low of 31 percent this year as developers moved away from massive construction projects.
Of the 203 retailers that opened in the city’s Union Square area in 2019, only 107 are still operating, a 47 percent drop in just a few pandemic-ravaged years.
Among the heavy hitters, Brooks Brothers, Ray Ban, Christian Louboutin, Lululemon and Marmot wrapped it all up.
Real estate investor Cyrus Sanandaji invested $41 million in the purchase of 60 Spear Street
A homeless man and a pedestrian are seen outside a closed Walgreens store at 60 Spear Street in downtown San Francisco, California, on Aug. 18
Cyrus Sanandaji, the founder of Presidio Bay Ventures, is confident the area is ready to rise again
Economists warn that the city is entering an “urban doom loop” – a vicious circle of interconnected trends and forces that are driving cities into economic and social ruin.
But real estate investor Cyrus Sanandaji, the founder of Presidio Bay Ventures, is confident the area is poised to rise again.
He is confident enough to invest $41 million of his company’s money to purchase an office building at 60 Spear Street, the San Francisco Chronicle reports.
The seller, Clarion Partners, paid $107 million for it in 2014.
Just a month ago, another company, SKS Investments, bought 350 California St. for 75 percent less than the seller would have wanted in 2020.
Presidio Bay Ventures has committed a further $50 million investment in the complex to help the building revamp its aesthetic, but the price is still significantly lower than what local office real estate was before the pandemic.
Sanandaji is hopeful that the city’s $12 artificial intelligence in funding and the job market will make a difference.
When other investors heard about his deal, they reached out to find out what they were missing.
A security guard walks into a closed Walgreens store at 60 Spear Street in downtown San Francisco, California, on Aug. 18
A homeless person walks past a closed Walgreens store at 60 Spear Street on Aug. 18
The city has also been struggling with rampant drug use and homelessness for years (photo: a group of homeless people on May 16)
“There was a lot of interest from institutional people who had previously told us that San Francisco was a no-fly zone,” he said.
“They weren’t ready to write the check yet, but they asked, ‘What do you see that we don’t? What do you see on the ground that inspired you to make this bet?’ Even having that conversation was a huge change.”
Ken Rosen, president of the Fisher Center for Real Estate and Urban Economics at Berkeley Haas business school, believes now is the time for investors to make a move.
“Recovery is really taking off,” he said. “If you can buy a good downtown building for $200 or $300 per square foot, that’s a good mid- to long-term bet.”
“Smart people are into bottom fishing – I think you’re going to see more of that.”
He thinks it may take some time before real signs of recovery become visible.
“San Francisco is still lagging, the least recovered of the major markets,” Rosen said.
Earlier this year, a disturbing report found that 95 downtown retailers — more than half the total — have closed since the start of the pandemic.
San Francisco’s once bustling Union Square is facing an exodus of businesses, residents and tourists as a result of its lax approach to crime, homelessness and open-air drug use
Of the 203 retailers that opened in the Union Square area of the city in 2019, only 107 are still operating
It’s a 47 percent drop in just a few pandemic-ravaged years
The city has also struggled for years with rampant fentanyl use and fatal overdoses, and is on track for its deadliest year yet
In the first five months of 2023, preliminary reports show there were 346 overdose deaths in the city — an increase of more than 40 percent from the same period in 2022.
But Sanandaji said media coverage of the hard times parts of the city have fallen into does not reflect the opportunity for growth in some areas.
“There’s a big gap between perception and reality in San Francisco right now,” he said.
“Nationally and internationally, people are confusing what’s happening in Mid-Market and Seventh and Mission as being representative of what’s happening throughout the 7X7.”
Earlier this year, Westfield stopped making mortgage payments for his massive shopping mall.
The company has defaulted on the $558 million loan and is returning it to the lender, who will appoint a trustee.
The decision was sparked by the decision of Nordstrom, the mall’s main tenant, to close.
Nordstrom, the main tenant of the Westfield mall, is closing this month
Coco Republic advertised that it was closing shop in downtown San Francisco
Westfield had largely blamed “unsafe conditions” and “lack of enforcement against rampant criminal activity” for Nordstrom’s departure.
Nordstrom occupied 312,000 square feet in the mall: When it closes this month, Westfield San Francisco will be just 55 percent rented.
“For more than 20 years, Westfield has proudly and successfully operated San Francisco Center and during that time has made significant investments in the vitality of the property,” the company said.
“Given the challenging operating conditions in downtown San Francisco, which have resulted in a decline in sales, occupancy and foot traffic, we have made the difficult decision to begin the process of transferring management of the mall to our lender, so that they have a receiver to operate the property in the future.’