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High-Stakes Musical Chairs – Are Tenants Tired of Downtown Games?

By Jason Hughes

600 B Street

For those of you following the play-by-play musical chairs of high-rise Downtown office buildings, Lincoln Properties (seller) had it in escrow to Rockwood (buyer) – but they pulled out of escrow. The new buyer is: (drumroll please!) Lincoln Properties! Yes, that is correct. The buyer is the same as the seller – just with a new equity partner.

530 B Street

The ultimate musical chair. Union Bank sold to Kearny Real Estate. Kearny sold to Bosa. Bosa is now selling to Swift Real Estate Partners. Each seller made millions. Each buyer bumped up their rental rate projections to justify the new purchase price. Pyramid scheme? No – but greater fool theory at work? Likely. We’ll see what happens one day when the music stops.

DiamondView Tower

I’ve commented about how DiamondView is the most expensive building in downtown. And while I really do like the building, I think they’ve been the recipient of fortunate circumstances rather than the building really being “worth it” rent-wise. Probably a very smart move, Cigna Insurance (with Cruzan as local partner) is trying to sell at what may be peak market conditions. Rumor has it Kilroy is interested at $650/SF! That’s double most prices for downtown office on a per-square-foot basis – and will set a new record for the area.

New Condo’s and Hotels Galore

All the cranes and construction going on Downtown are hotel and residential. There are small exceptions – like Lankford’s Maker’s Quarter for 50k SF in East Downtown. And the Pacific Gateway demolition you see happening near the aircraft carrier and Seaport Village? I hope I eat my words – but I really doubt that project will get financing anytime soon. Hopefully it sells too – as I would love to see new buildings come out of the ground. But for numerous reasons, I don’t think we’ll see any deliverables for at least five years…

Musical Chairs

It’s not only landlord buyers and sellers playing high-stakes musical chairs. Tenants are too. For the first time in a half-dozen years, we’re having large clients evaluate leaving downtown. With office and parking rates escalating at a record clip, along with the lack of parking space and a surge of homeless people, the rose bloom might be soon falling off…

Jason Hughes is chairman, CEO, and owner of Hughes Marino, an award-winning commercial real estate company with offices in San Diego, Orange County, Los Angeles, San Francisco, Silicon Valley and Seattle. A pioneer in the field of tenant representation, Jason has exclusively represented tenants and buyers for more than 25 years. He writes about topics in commercial real estate from a tenant’s perspective on his blog, Downtown Dirt. Contact Jason at 1-844-NO-CONFLICT or jason@hughesmarino.com to learn more.



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