Related California to plant a 41-story office-hotel stake in San Francisco

Related California plans to build a 41-story office building and hotel in San Francisco while nearly two out of five city workplaces sit empty.

For the Irvine-based developer, it’s all in how you crunch the numbers for the proposed office-hotel tower at 530 Sansome Street, in the North Financial District across from the Transamerica Pyramid near Jackson Square, the San Francisco Chronicle reported.

Yes, overall office vacancy across the city hovers at a dismal 37 percent. Yes, the top five buildings have a 16 percent vacancy.

But when you pull away the drapes, the city’s true office trophies with views from the Golden Gate to the Bay Bridge command a vacancy of 6.9 percent — the target for the Related venture.

“Right building in the right location at the right time,” Matt Witte, executive vice president of acquisitions and development for Related California, told the Chronicle.

“This started out as a contrarian bet but as we dug in deeper and looked at the market, how it is evolving and maturing out of COVID, it doesn’t seem so contrarian any more,” added Gino Canori, president of Related California. “It’s a story about San Francisco’s recovery, about the city coming out of a tough time and building something everyone can be proud of.”

Plans call for a 544-foot tower with 360,000 square feet of offices atop a five-star, 200-room hotel, plus a new firehouse at 447 Battery Street to replace a station swallowed up by the project. A previous 19-story hotel and fitness club project, approved in 2021, stalled.

The city is expected to publish an environmental study on Tuesday, March 11. Related hopes to secure approvals to build the tower this fall, allowing the firm to break ground by late next year. If all goes well, the gleaming glass rectangle could be completed by 2030.

It would be the first new North Financial District building since 350 Bush Street opened in 2018, and the first new five-star hotel in 30 years, according to the Chronicle. It’s expected to cost $600 million.

The tower, designed by Chicago-based SOM, would anchor a block across from the Transamerica Pyramid, which New York-based Michael Shvo revamped, investing $1 billion. Rents for top-floor offices in the area are north of $200 a square foot, more than three times the city average.

It would also be built next to Jackson Square — the hot spot in San Francisco’s glacial rebound.

Related California, a unit of New York-based Related Companies, “did a lot of homework,” touring buildings and digging into leasing data, Canori said.

As it hoovered up information, it grew convinced there was demand for a new building with “killer views” and features that top tenants want — meeting rooms and workout facilities and outside terraces and swank restaurants.

Such amenities not only help recruit and retain talent. They attract them to a return-to-office.

Three North Financial District tenants have leases expiring in 2030 who are “taking a very close look” at the proposed building, Canori told the newspaper, which “is further emboldening our ability to press ahead with getting the project approved and started.

“We think the market is there,” he declared.

— Dana Bartholomew