Florida-based 1754 Properties has bought a six-story San Francisco office building for nearly $28 million and is looking for more opportunities in the city. The acquisition marks an expansion beyond the firm’s home market, as CEO Joe Smith says he sees potential for a downtown office recovery and wants to build a larger Bay Area portfolio.
Key takeaways
- 1754 Properties closed on 40 Jessie St. at the end of October for nearly $28 million, according to city records.
- Google occupies the building under a lease that runs through 2030; about 60% of the property is designated lab space.
- The firm is pursuing similar office acquisitions and seeking local partners, but says it is not targeting hotels in San Francisco.
A first step toward a Bay Area portfolio
The purchase gives 1754 Properties a foothold in San Francisco as it considers further investments. Smith said the company is interested in comparable buildings and hopes to work with local partners as it grows its office holdings in the region. He characterized the move as a notable shift after years in which California investors were more likely to put money into Florida.
Google lease shapes the investment outlook
Google is the sole occupant of 40 Jessie St. The company acquired Fitbit, the building’s previous tenant, in 2021, and its lease is set to continue through 2030, Smith said. The property’s lab-designated space adds another dimension to its office use.
Smith views the lease timeline as a potential advantage. He expects that demand could strengthen before the lease expires, pointing to continued growth in artificial intelligence and forecasting that downtown vacancy could fall to single digits in four or five years. Those are his projections, not guaranteed outcomes; future demand and rents will depend on market conditions.
The firm’s strategy and constraints
Smith said 1754 Properties is optimistic about San Francisco and expects investors from elsewhere in the country to take a closer look. The company’s interest, however, is focused on offices rather than every type of commercial property.
Although hotels are a specialty for 1754, Smith ruled them out as a local target for now, citing the high concentration of unionized workers and labor costs. For its next San Francisco deals, the firm is instead looking for office properties that fit the strategy behind its Jessie Street acquisition.
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