Kilroy Realty is selling a San Francisco office complex it leases to Dropbox for just over $1 billion, making it the second-highest price paid for a single property in the city’s history.
Kilroy announced the news Monday, saying it agreed to sell the 750,000-square-foot complex at 1800 Owens Street in Mission Bay. The Los Angeles-based investor did not name a buyer, but the San Francisco Chronicle reported it was private equity giant KKR. Kilroy developed the four-building property — called the Exchange — for about $585 million. It serves as file-hosting company Dropbox’s headquarters, though the firm subleases some space.
At $1,440 per square foot, the deal would be the priciest by that metric. It slips to No. 2 in total sale price, just behind Boston Properties’ $1.2 billion purchase of the Embarcadero Center in 1998.
San Francisco’s real estate market is undergoing a massive correction, fueled by the pandemic. Demand for office space has cratered and the city is seeing some of its highest vacancy rates in the space in decades.
Many of the Bay Area’s tech tenants have allowed their employees to work remotely for the foreseeable future, and many have put up office space for sublease. That list includes Dropbox.
Unlike some other big leaseholders, Dropbox found a tenant late last year for some of its empty office space. In December, biotech firm Vir leased about 134,000 square feet at the Exchange through mid-2033 for $47.44 a foot, with a 3 percent annual hike, according to the report.
The pandemic also cut into the sale of the iconic Transamerica Pyramid. Michael Shvo’s eponymous company and Deutsche Finance America acquired the tower from Aegon NV in late October for $650 million. That was a 10 percent discount from the $700 million the buyers were going to pay before Covid.
[SFC] — Dennis Lynch