G
lenn Gilmore, a developer at Brick & Timber Collective, is busy renovating 500 Washington St., a 100,000-square-foot office building in Jackson Square that was constructed in 1982. The first order of business: replacing physical door locks with digital ones that can be unlocked via phone. "I hate keys," Gilmore said. "Anything manual just feels super old nowadays." His firm acquired the eight-story brick structure this month and plans a complete remodel, including opening up floor plans to expose panoramic views.
The ground floor will become a restaurant with outdoor seating, while upstairs interior walls will be knocked down to reveal a 360-degree view of the city. A rooftop bar is also in the works. Brick & Timber Collective purchased the building for $32.6 million, a relatively low price considering its value in San Francisco's distressed commercial real estate market.
The deal shows how more institutional investors are emerging from the sidelines since the pandemic. Barings, a subsidiary of the Massachusetts Mutual Life Insurance Company, signed onto the project as a limited partner and will add layers of debt financing to the renovation after the new year. The deal took only four months to complete, making it Brick & Timber Collective's largest project in San Francisco.
San Francisco's office market is showing signs of recovery, with office leasing activity reaching its highest point since 2019. The city's office vacancy rate declined for the first time in 19 quarters, from 36.9% to 36.7%. Colin Yasukochi, executive director of CBRE's Tech Insights Center, expects tenant demand to increase in 2025 as growth plans gain momentum.
Local developers are also seeing a turnaround in the market. Redco Development, led by brothers Chris and Jason Freise, has closed on three purchases in downtown San Francisco this year, including two office buildings that were acquired at significantly lower prices than their original values. The renovated suites at 400 Montgomery St. building are geared toward emerging tech firms.
Redco is using the cost savings from these deals to renovate the properties and attract new tenants. They're also offering tenants the opportunity to buy into building ownership, which has paid off with four new leases at 400 Montgomery while the building was in escrow. "Downtown urban cores are struggling, but one thing that hasn’t changed is that if you build a good product, people will seek it out," said Chris Freise.
Jesse Feldman, Gilmore's partner at Brick & Timber Collective, shares this sentiment and envisions the area around 500 Washington St. being activated with laser-light projections similar to those at Transamerica Pyramid. "We have the opportunity right now to implement real changes to our physical environment," he said. "Let’s build a fucking epic bar. San Francisco is about iconic places where you form lifelong memories with friends."
