Flynn Properties and DRA Advisors acquired Market Center, a two-tower complex with 770K SF of Class-A office space in the Financial District.
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The purchase of 555 and 575 Market St. represents the city’s largest office deal since 2022 and could signal a turning point for the beleaguered downtown office market.
Flynn and DRA acquired Market Center by purchasing the loan and accepting a deed-in-lieu of foreclosure. The towers last traded in 2019 for $722M. The acquisition reportedly came at a significant discount of 76%, with a purchase price of $177M, according to The San Francisco Standard.
JLL will lead leasing. The buildings’ current tenants include Waymo, Harvey AI and Mindspace.
San Francisco’s office market has faced headwinds since the pandemic, but some indicators are trending positively. Leasing volume has increased over the last three quarters, exceeding 2.2M SF, making the first quarter the strongest in five years, according to CBRE. Total vacancy, currently at 35.4%, is forecasted to decrease as leasing volume remains strong.
“In my experience, changes in the market happen very fast. They happen faster than most people expect. They're usually well underway before most people appreciate,” according to Greg Flynn, CEO of Flynn Properties.
“This recovery is well underway. This was, in part, a timing exercise.”
Flynn and DRA have a repositioning strategy for the 21- and 40-story towers focused on an amenity space called The Breakroom.
The space will include sport courts, exercise areas, conference facilities and a lounge.
“The main purpose is to position the building as the funnest, most active office building in San Francisco so that tenants want to be in our project,” Flynn said. “There’s no reason why the office service experience needs to be drab and colorless. It can be a pleasant hospitality experience.”
The amenities and programming dovetail with Mayor Daniel Lurie’s effort to drive downtown’s economic recovery, which includes a focus on office-to-residential conversions and streamlining the permitting process for small businesses.
“The mayor is very supportive. This project is perfectly aligned with his priorities. It’s all part of the same revitalization effort,” Flynn said.
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