UPDATED: Apr 9, 2012, 10:01am PDT
Tishman Speyer says it will start construction in July on a 286,000 square foot building in San Francisco’s hot South of Market, the first speculative ground-up office development to start in the city since 2007.
In a letter to San Francisco commercial real estate brokers, Tishman Speyer Managing Director Allen Palmer said his company closed escrow April 5th on the development site for Foundry Square III, a parking lot that was previously owned by Wilson Meany Sullivan.
“We just closed escrow yesterday and picked up our permit today,” stated Palmer. “We plan to start this July with a finished building delivery end of 2013, early 2014. The project is funded with all equity without the need of a construction loan or pre-lease commitment.”
In addition, Palmer said that the company plans to break ground early next year on an even bigger San Francisco bet — a 27-story, 450,000 square foot tower at 222 Second St. The 222 Second St. building will be completed in the fall of 2014, Palmer said.
“We will develop a world-class high rise at the intersection between the traditional CBD and the growing tech corridor along Second Street to SOMA,” stated Palmer. “We have purposely designed the floorplates to cater to the Tech user with a distinct core design to allow expansive floor depths for ‘collaborative’ space, yet also appeal to the professional, traditional office space user by the window line column and mullion spacing.”
Foundry Square III is the final phase of a four-building SoMa campus that Studios Architecture designed more than a decade ago. Three of the buildings are complete and are anchored by Orrick, Herrington & Sutcliffe, BlackRock Inc., and Gymboree. Two of the Foundry buildings have been on the market in recent weeks and both are fetching significantly more than replacement costs. State Teachers Retirement System of Ohio is reportedly in contract to pay $240 million, or $715 a square foot, for Foundry Square I, a deal that would represent the first major sale over $700 a square foot since the financial crisis of 2008. The 334,000-square-foot building at 400 Howard St. was constructed as a build-to-suit for Barclays Global Investors, which merged into BlackRock in 2009.
“We have all experienced much excitement in our market over the last several years and Tishman Speyer is pleased to add even more good news and two great opportunities,” stated Palmer.
The 10-story Foundry Square building is designed to achieve a LEED Gold and features 13-foot finished ceiling heights and expansive floorplates that range from 22,771 square feey to 35,531 square feet.
“This floorplate design and size really serves the tech tenant demands and needs perfectly. Yet traditional professional firms like Orrick, Herrington & Sutcliffe and Blackrock have designed and enjoyed beautiful workplaces in the other Foundry buildings,” stated Palmer.
The news comes as San Francisco is leading the United States in office rental rate growth. San Francisco Rents grew 6.8 percent over the last year, with double-digit growth in the technology-heavy South of Market. Rents have jumped 40 percent since bottoming out in 2010.
Tishman Speyer built the only speculative office tower during the last market cycle, 555 Mission St., which is for sale.
J.K. Dineen covers real estate for the San Francisco Business Times.
Source: San Francisco Business Times.