Google Pays “Exorbitantly High” Rent at SF Industrial Site

Google has leased a 3.5-acre former school bus depot in the southeastern quadrant of San Francisco, according to a fourth-quarter office report from JLL and confirmed by an industry source.

The deal is for 62 months, according to the source, which likely means a 5-year lease and two months free rent, and was signed in November. The 154,000-square-foot site was leased at $2.30 NNN, with triple-net costs around 55 cents, for a gross rent of $2.85 per square foot.

“That’s exorbitantly high, but you can’t find 3 acres anywhere,” said the source. “Google is willing to pay double market rent, and they’re doing it because there’s no other 3-acre site in San Francisco.”

It’s unclear if the parking lot — which also hosts three early 1970s-era one-story industrial buildings totalling just over 13,000 square feet — will be used for Waymo, Google’s autonomous car unit, or the tech giant’s commuter buses. Given that the site does not have “heavy power,” it is more likely the latter, according to the source.

CBRE had marketed the property at 2270 Jerrold Avenue since May, according to a LoopNet listing, which touted its strategic location in “San Francisco’s protected industrial corridor between the 101 and 280 freeways.”

That’s the same month Goodman North America, a subsidiary of Australia’s largest industrial developer, bought the property for $70 million from First Student, a subsidiary of a Scotland-based transport company and owner of the Greyhound bus line. CBRE represented both sides of the sale.

Goodman was on an industrial buying spree in the neighborhood, located between Potrero Hill and the Bayview, last year. It picked up three parcels on Napoleon Street from San Francisco Warehouse Parking Company for a total of $110 million in late November, according to public records. Two smaller locations abutting the Jerrold property provide about 2 more acres of parking, while the biggest buy in the 7.2-acre deal was just over $83 million for about 5 acres of industrial warehouse space at 180-200 Napoleon. The property houses a U.S. Postal Service distribution center, auto body shop and lumber warehouse.

The industry source was “very confident” that Google would lease a portion of Goodman’s newly purchased sites.

Representatives for Google, CBRE and Goodman did not respond to a request for comment.