New York Investor Bets $1B On San Francisco

San Francisco Market Street
Market Street

By year's end, a New York-based investor will have closed on over $1B of prime San Francisco property.

Paramount Group Inc., a real estate investment trust focused on New York, Washington, D.C., and San Francisco, will form a joint venture for the $722M purchase of Market Center, a two-building Class-A office complex in San Francisco's Financial District, the company announced on Thursday.

Paramount has also now closed on its unrelated $402M joint venture acquisition of 55 Second St., a 387K SF office building within a block of the new Transbay Transit Center. It has 44% interest in the 17-year-old building and paid $1,039 per SF.

The company expects to close on Market Center, which includes the 280K SF building at 555 Market St. and the 473K SF building at 575 Market St., in Q4 of this year and will pay $959 per SF. Blackstone owned Market Center as of 2016, according to property records. Swift Real Estate Partners owned 55 Montgomery St. as of December.

Paramount Group didn't immediately respond to request for comment.

Investors have yet to cool on San Francisco's still-expensive office market, especially in its Financial District. Last week, Intercontinental Real Estate Corp. and Harvest Properties acquired all of FiDi's 400 Montgomery St. building for $900 per SF. And in July, REDCO Development and AEW Capital Management acquired One Montgomery Street for $1,081 per unit — a record so far this year in San Francisco.

Rents continue to climb as well. Average asking rents for Class-A office space in FiDi reached $95 per SF in Q2, according to Colliers International.

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