Google to Give Up 300 KSF at San Francisco Trophy Tower

May 9, 2024

Office Featured News San FranciscoMoreWest

The company has been leasing the space since 2018.

As San Francisco continues to grapple with high office vacancy rates that have plagued the city since the pandemic, Google confirmed it’s giving up 300,000 square feet of office space at One Market Plaza, a 1.6 million-square-foot waterfront office complex, next April when the company’s lease expires at the Spear Tower.

Google is giving up 300,000 square feet of office space at One Market Plaza in San Francisco. *Image courtesy of CommercialEdge*

Owned by Paramount Group and Blackstone, the complex has two high-rise towers and an 11-story office annex building known as the Landmark, where Google will retain an office when it clears out of the larger tower. Google has leased the 300,000-square-foot office space since 2018.

Google spokesperson Ryan Lamont told the San Francisco Chronicle, which broke the story, that the company is committed to having a long-term presence in San Francisco but would not say how long it would retain its space in the Landmark building at the complex. Lamont reiterated the company’s stance that it is focused on investing in real estate efficiently to handle the current and future needs of a hybrid workforce. Google also leases about 400,000 square feet of space at the nearby 345 Spear St., but Lamont declined to discuss a possible lease renewal at that property, according to the Chronicle.

Google’s announced exit comes one year after Visa listed its 190,000-square-foot headquarters at One Market Plaza for sublease ahead of its move this year to Mission Bay, a 1.4 million-square-foot megaproject in the Mission Rock neighborhood being developed by Tishman Speyer and the San Francisco Giants. Also last year, Autodesk listed 73,000 square feet at One Market Plaza for sublease as well.

However, a Paramount and Blackstone spokesperson told the Chronicle the Google lease doesn’t expire for another year and they are already in discussions with possible new tenants. The property also still commands rents about 20 percent higher than other trophy office assets in the city, the Chronicle reported.

The Google lease news came several months after Paramount and Blackstone modified and extended their existing $975 million loan for the trophy office complex. The mortgage was due to mature in February, but the joint venture partners worked out a deal to reduce the loan balance to $850 million, following a $125 million paydown. The modified loan matures in February 2027, with a possible one-year extension.

Office concerns remain

While the San Francisco office market has seen some positive net absorption in the first quarter, the strongest quarter since 2020, issues remain. Vacancy increased to 32.7 percent and availability stayed flat at 37 percent, a sign of surplus space, according to Cresa’s San Francisco office market summary for the first quarter of 2024. The report also noted that 84.7 percent of tenants taking 100,000 square feet or more in the past two quarters move into subleased space, which offer discounted rents, lower capital costs and quicker occupancy. New leases in the first quarter included Silicon Valley Bank, a division of First Citizens Bank, opening a new office on several floors of 222 Second St.

Like other technology companies, Google has had layoffs in recent years and began downsizing its real estate portfolio as more of its employees chose to work remotely or take advantage of flexible schedules that didn’t require them to be in the office five days a week.

In February 2023, the company stated it expected to spend $500 million in the first quarter that year to reduce its office space globally. Several months later, Google put more than 1.4 million square of office space in the Bay Area up for sublease, including 736,000 square feet in Sunnyvale, Calif., according to The Real Deal. In November, Google and Lendlease agreed to halt the $15 billion development of four master-planned mixed-use neighborhoods in Silicon Valley, including one project in Mount View, Calif., that would have included office space as well as residential and retail uses across 153 acres. Further north on the West Coast, Google notified Kirkland, Wash., last year it wasn’t going to buy a 10-acre property where it was planning a major redevelopment and space for as many as 6,000 employees.

In positive office news, earlier this year Google opened its New York City headquarters at the expanded and rehabilitated 1.3 million-square-foot St. John’s Terminal building at 550 Washington St. in Manhattan’s Hudson Square section. The adaptive reuse project is the centerpiece of Google’s 1.7 million square feet of space in the neighborhood, including nearby offices at 315 Hudson St. and 345 Hudson St.