At a time when office and hotel property values in downtown San Francisco are declining rapidly due to persistent vacancies, Related California is making a big bet that the combination of a luxury hotel and a “custom” office tower one block from the Transamerica Pyramid will pay off.
The company received approval in 2021 to build a 19-story mixed-use tower above a reconstructed municipal fire station at 530 Sansome Street that would include a hotel, 35,000 square feet of co-working space and a fitness club.
At a time when the vacancy rate for office space in San Francisco is around 37%, Related California has now applied to dramatically increase the office space in the project on the edge of the city’s financial district. San Francisco Chronicle reported.
According to the application, Related California wants to build 24 floors of office space totaling 375,000 square feet atop a 200-room luxury hotel that would rise 11 stories to the base of a 41-story, 575-foot tower.
The developer is asking the city for permission to demolish the two-story, 1970s-era Fire Station 13 and replace it with the new tower. A $40 million replacement fire station would stand alone next to the tower on an adjacent property at 447 Battery Street, for which Related California has signed a purchase agreement to protect it from foreclosure.
The offices and hotel in the tower at 530 Sansome would be separated by a floor of leisure facilities. The two floors above the lobby on the ground floor of the tower would house a restaurant and a conference room.
According to the report, Related California does not expect a quick recovery in San Francisco’s office sector, nor a sudden change of heart among the technology conferences that have canceled their schedules at the Moscone Center.
Matt Witte, a managing director at Related California, told the newspaper the project targets the sweet spot of an escape to quality that has fueled demand for spaces with impressive views. He estimated the expanded Sansome project’s value at $600 million.
“The office and hotel markets are not homogeneous,” Witte told timelineand explained that the office space at 530 Sansome is designed for tenants interested in “smaller floor plans with a view.”
The new tower tapers towards the top and offers floor areas ranging from 18,000 to 9,000 square feet – a popular size among venture capital firms that flock to the Jackson Square area in search of the most attractive amenities.
The luxury hotel’s target audience is not convention and meeting travelers, Witte said. “This is not a hotel with 100,000 square foot ballrooms,” he said. “This is a very special boutique hotel, primarily for tourists and business travelers, in a part of the city where no hotel has been built for many, many years.”
In order to build the new tower, Related must obtain an exemption from the city to meet the neighborhood’s 200-foot height limit.
Mayor London Breed has expressed his support for the project.
“While the doomsayers sit on the sidelines desperately clinging to their narrative about our great city, there are people who are investing in our future and working every day to build a stronger, more resilient San Francisco,” Jeff Cretan, spokesman for Mayor Breed, told the timeline.
