550 California represents the future of prime Downtown San Francisco office space.
The former Wells Fargo headquarters, which was scooped up by Peninsula Land & Capital in a landmark deal earlier this year, is located in the heart of SF’s downtown and is bringing high-quality office space to the rental market at a fraction of the going price. With so much uncertainty in the office market, buildings like 550 California represent a singular opportunity for companies to build a magnet that will attract workers back to the office. We caught up with Peninsula’s Roger Fields and Raise Commercial Real Estate’s Felipe Gomez-Kraus to learn how 550 California’s unique attributes position it as the answer to many of the questions that are being posed about the role of offices in the age of remote work.
The Post-Pandemic Landscape
Much has been made of the death of offices in the wake of the COVID pandemic. According to Census figures, over ¼ of SF metro-area workers worked from home in 2022, a number that was unheard of in the pre-pandemic days. The resulting impact on office occupancy has been dramatic, causing a downward spiral in office rents that, in part, made Peninsula’s impressive purchase of 550 California possible in the first place.
But in the wake of that crisis comes opportunities, and 550 California is fertile ground for founders to build the next generation of Fortune 500 companies.
“I think the era of coming into the office from nine to five is gone for the foreseeable future,” said Gomez-Kraus, whose firm specializes in workplace solutions for leading companies in the Bay Area and beyond. “But we’ve established that people coming together increases velocity. If you’re a company that’s looking for talent, and looking to do the things that make the Bay Area so great, the workplace has to have a big role in that.”
The Future of SF Office Space
One facet of the downturn in office has been what’s called the flight to quality. As Class A office space has opened up, companies that had previously been priced out of the best office space have had the opportunity to upgrade their space, whether through subleasing or direct availability.
“In 2019, if a company was looking for a bargain, they had to go into secondary and tertiary submarkets that were farther away from public transportation and offered only B and C-class buildings,” explained Gomez-Kraus.
Thanks to Peninsula’s low purchase price, the rents at 550 California will be about 30% of comparable Class A Downtown space, opening up this quality of office space to an entirely new segment of the business community.
As Gomez-Kraus summarized, “550 California is a Class A building in an incredible location with great infrastructure, and it’s vacant and available to the market at incredibly competitive rates.”
550 California’s Unique Advantages
Located right across the street from The Bank of America Building, 550 California sits at the nexus of transportation infrastructure and entertainment. “It’s the ground zero of the Financial District in San Francisco,” said Fields. “We’re right next to the Omni Hotel, down the street from the BART station, and the Cable Car runs right in front.”
Thanks to the money that Wells Fargo put into the building’s interiors over the last five years, 550 California has a lot of the same “plug and play” features that allow it to compete with subleases in terms of flexibility and price.
And Peninsula is in the process of adding even more amenities. “We’re going to add a gym and a conference center,” Fields told us, “and we’re actively searching for food uses in the lobby and on the ground floor.”
The Attraction of 550 California
All of these features feed into what Gomez-Kraus described as the “Magnet vs. Mandate” dynamic. Businesses have the choice to either mandate that their workers come back to the office or attract them back into the office with a magnetic, exciting workplace. Buildings like 550 California are perfect for businesses looking to attract workers back, even if it’s not on a nine-to-five basis.
The ethos is at the heart of evolving dynamics that Gomez-Kraus is observing around the Bay Area. A new wave of innovation is washing across the Bay, particularly in the field of AI, which has seen massive growth in just the last year. 550 California is the perfect place for the next major company to build itself into a major player.
“Could a company like Google survive fully remote? Sure. Could you ever build the next one fully remote? No,” explained Gomez-Kraus, who pointed out that a recent spate of tech layoffs released the next generation of founders into the market. “These founders want to bring people together and build, and San Francisco is the perfect place to do that.”
This means leasing space at buildings like 550 California, which brings workers back to the office by combining a desirable location and great amenities with an unbeatable price point. And it’s a trend that gives Fields and Gomez-Kraus confidence that the Bay Area office market has seen its lowest point and is poised for a major comeback.
“The very first deal I did was a ground lease in the Stanford research park,” recalled Fields. “I have my roots in finding value-add properties in this area, and I see the value in San Francisco.”
“San Francisco is a relatively small market, and it is space-constrained. There will not be another 550 Cal constructed,” said Gomez-Kraus. “It’s opportunities like this that make us bullish on San Francisco in 2024 and beyond.”
If you’re looking to secure a below-market lease on prime Downtown San Francisco office space, reach out to Peninsula Land & Capital to learn more about 550 California.