The San Francisco-Peninsula market office sales volume for the second quarter of the year was $533 million, up 3.5 percent since the previous quarter, according to CommercialEdge. Investment activity in the Peninsula amounted to $1.1 billion for the first half of the year, down 37.3 percent year-over-year.
Six office properties, totaling 534,000 square feet, changed hands during the second quarter in the Peninsula market. Secondary urban properties accounted for most of the space (402,960 square feet), while suburban submarkets recorded little activity.
Compared to other gateway markets, San Francisco maintained a middle position for sales during the first half of the year, ahead of Miami ($995 million), but behind Manhattan ($2.8 billion), Los Angeles ($2.3 billion) and Chicago ($1.8 billion).
Despite the decrease in sales volume since the previous year, prices continued to increase in the San Francisco-Peninsula market. For office properties traded in the first half of the year, the average price per square foot was $920, up 28.5 percent year-over-year.
The largest sale of the second quarter in the San Francisco-Peninsula market occurred in the SoMa submarket. DivcoWest acquired a 305,260-square-foot Class A office property for $356 million from Gap. The LEED Gold-certified asset traded at $1,166 per square foot, significantly above the market average.
DivcoWest was involved in another large transaction during the second quarter. The company sold a three-story office asset, also in the SoMa submarket, for $71 million to The Sobrato Organization. The asset was sold for roughly $1,726 per square foot, the most expensive out of all properties that traded in the second quarter.
Bay Area Office Sales Outperform Major Markets
The Bay Area—comprising the East and South Bay—had a very strong second quarter. Office transaction volume during this period totaled $1.2 billion, on par with the first quarter. The market’s life sciences sector continued to attract massive investments, with the first half of the year recording $2.6 billion in office sales—down 27.1 percent year-over-year. Although recording a decline since 2021, this is on track with most metros tracked by CommercialEdge, as most major markets had less activity this year.
In the second quarter, roughly 2.4 million square feet of office space changed hands in the market. Investments were split between primary (1 million square feet) and secondary (1.3 million square feet) suburban markets, while a single property—comprising 70,000 square feet—traded among all urban submarkets. The average price per square foot reached $511 as of June, up 1.2 percent year-over-year.
In June, Tishman Speyer completed the largest office sale of the year. The investor sold its Meta-leased campus in Sunnyvale for $707 million to CommonWealth Partners. The tech giant leased the entirety of the 719,037-square-foot property back in December 2021. At roughly $1,006 per square foot, the transaction also topped the market’s average price.
Apart from technology tenants, healthcare also attracted investment. Anchor Health Properties expanded its portfolio in April. One of the buildings it purchased was the 60,000-square-foot Park Place Medical, located in Vallejo. The property traded at $242.6 per square foot, or $14 million in total.
In Palo Alto, Wheatley Properties acquired a 34,558-square-foot office property for $39.3 million from Tarlton Properties. The asset at 250 Cambridge Ave. changed hands as the most expensive asset on a per-square-foot basis, averaged at $1,094.
CommercialEdge covers 8M+ property records in the United States. View the latest CommercialEdge national monthly office report here.