Pricey new digs pushing some to older and cheaper (Excerpt)
San Francisco Business Times
Written by J.K. Dineen and Ryan Tate
November 16, 2007
The wild speculation on Class A office buildings is history. With credit tight and recent buyers like Morgan Stanley nervously awaiting the $60-a-square-foot average rents they need to meet pro formas, the investment action has shifted to older, cheaper buildings, according to Anton Qui of TRI Commercial.
Qui recently brokered two such deals on behalf of Tang Fat Enterprises, a family of San Francisco-based Hong Kong investors. The first was 20-28 Second St., which sold for $6.5 million. The seven-story, 28,000-square-foot building was purchased by Hopewell Investment Co., an affiliate of AGI Capital Group. The building is almost entirely leased. Hopewell has also retained Qui and Rob Maccarone as leasing agents for the building.
The second sale is 219-225 Kearny St., a five-story office building with a ground-floor retail space totaling 7,902 square feet. The sale price was $2.7 million, or $350 a square foot. The property was 100 percent leased at the time of closing. The buyer is Urban Properties, which recently sold 354 Pine St. to the Brandi Law Firm and the Sturdevant Law Firm.
Qui said the aggressive asking rates sought by Morgan Stanley, and other top-of-the-market buyers like Broadway Partners, is creating a tight market for average tenants looking for sub-$40 rates.
"A lot of these buildings are only available to a small segment of tenants in the marketplace," said Qui. "We may have 9.5 percent vacancies, but for average tenants it feels more like 6 or 7 percent. And the Class B and C markets stand to benefit."