San Francisco’s beleaguered downtown office market is seeing a glimmer of activity, with the Transamerica Pyramid securing leases totaling 25,000 square feet across three deals, including one that represents a record high rental rate for the West Coast. The deals, completed in January , signal a potential turning point for the iconic building and the city’s broader commercial real estate landscape.
According to Michael Shvo, the building’s operator, one of the leases reached over $300 per square foot – the highest office rent ever seen in San Francisco. While the Chronicle was unable to independently verify this claim as a West Coast record, Shvo contends it is second only to 1 Vanderbilt in New York City. The tenant for this premium space, occupying approximately 4,000 square feet on the 44th floor, has requested anonymity.
The revitalization of the 48-story Transamerica Pyramid, following a $250 million overhaul, appears to be attracting high-profile tenants despite the challenges facing San Francisco’s office sector. The other two leases finalized include space for Coatue, a tech-focused global investment firm, and Mizuho, a Japanese megabank. Rental rates for Coatue and Mizuho were not disclosed, though a spokesperson for Shvo indicated that tenants on higher floors pay higher rents.
These deals are particularly noteworthy given the high vacancy rates plaguing many San Francisco landlords. The Transamerica Pyramid is now reportedly the only building in the city to have signed leases exceeding $200 per square foot in the past year, according to local real estate insiders. This suggests a growing demand for prime office space in select locations, even as the overall market struggles.
The broader commercial real estate market is experiencing a complex dynamic. While multifamily sales dipped in the second quarter of , demand remains at record levels, and vacancies are tightening. Nationally, multifamily sales totaled $35.1 billion in Q2 , a 14.4% year-over-year decrease, though first-half volume still edged up 5.3%. Multifamily remains the top asset class, holding a 33.4% market share, above its long-term average.
Regional trends are playing a significant role. The Sun Belt continues to lead in activity, accounting for 48.9% of transactions over the past 12 months, with Dallas, Austin, and Phoenix as key markets. The Midwest is also gaining traction, with investor interest increasing in cities like Columbus and Milwaukee. Dallas led first-half sales with $5.6 billion, while Seattle and Portland saw year-over-year increases exceeding 75%.
The success of the Transamerica Pyramid in attracting these leases aligns with a broader trend of demand for “super prime” commercial real estate. Michael Shvo, CEO and chairman of SHVO, has emphasized the performance of his properties in securing record rents with top-tier tenants. This suggests that investors are increasingly focused on quality and location, even in challenging market conditions.
The build-to-rent market is also demonstrating resilience and expansion. Despite broader economic uncertainties, this sector continues to succeed, indicating a sustained demand for rental housing options.
The recent activity at the Transamerica Pyramid, while not indicative of a complete recovery for San Francisco’s office market, offers a positive signal. The $1 billion investment by Michael Shvo appears to be yielding results, attracting tenants willing to pay premium rates for space in a revitalized landmark building. The situation highlights a bifurcated market, where high-quality properties in desirable locations continue to perform well, while older or less well-maintained buildings struggle to attract tenants.
As of today, , the long-term impact of these leases on the broader San Francisco market remains to be seen. However, the Transamerica Pyramid’s success provides a case study for landlords seeking to reposition their assets and attract tenants in a rapidly evolving commercial real estate landscape.
