How To Attract Office Tenants In San Francisco? Presidio Bay Wants To Create The 'Office Resort'

To say it’s a rough time for office in San Francisco is a bit of an understatement.

But Cyrus Sanandaji, CEO and founder of Presidio Bay Ventures, is a man with a plan.

Presidio Bay last month filed plans with the city of San Francisco to redevelop the 11-story, 154K SF office building at 60 Spear St. into what the company is calling an “office resort.” If all goes according to plan, the midcentury office building steps from the Embarcadero will feature a spa with warm- and cold-water plunges, saltwater floating pools and sauna rooms, a fitness center, conference and employee entertainment areas, coworking lounges, and a café and bakery in the lobby, all crowned with a 7,700 SF rooftop bar and restaurant.

As planned, the project will also leave the building three floors taller and with an additional 16K SF, bringing it to 170K SF and 14 floors. San Francisco-based Presidio Bay has developed 39 projects, many focused on adaptive reuse, valued at $5.6B.

“Regardless of an office building’s vintage, there's so much more that we demand, and tenants need and want, out of an office building than what they expected five years ago,” Sanandaji told Bisnow. “So it's not just about work in the traditional sense. You're not there to fill up desks, seats, workstations and conference rooms. We go to work for very different reasons today than we did five years ago.”

Presidio purchased the building last year for $41M, less than half of the $107M its previous owner, Clarion Partners, paid in 2014.

The pandemic blurred the lines between home and work, which had a major impact on the proposed design of The Spear, Sanandaji said. People were used to living in their homes and then leaving those spaces every morning for commercial settings to work. Before the pandemic, there was limited crossover, Sanandaji said. The office resort concept creates a bridge between the home and traditional office setting.  

He hopes that bridge will also span the divide between landlords and tenants in San Francisco, where the office vacancy rate hit an all-time high of 36.6% in the first quarter, according to preliminary data from CBRE.

Sanandaji said that figure will continue rising and predicted a vacancy rate of 40% at some point this year. Despite that, he is bullish about a bounce back.

“San Francisco has all the innate characteristics and features that are bound to lead to recovery,” he said. “Our current woes are all self-inflicted and, unfortunately, a product of failed leadership.”

He cited a number of “green shoots in the market,” including strong venture capital investment, population recovery and new job drivers, that continue to attract people to the Bay Area.

Sanandaji took the idea of a flight to quality, a well-worn idea in the office market by now, a step further. People aren’t just looking for quality space, he said — they’re looking for quality experiences.

“Part of the rebellion against office and the push for remote work or work-from-home was not so much a push against the concept of the office … it was a reaction to the cubicle farms and the uninspired-type spaces that are soul-sucking,” Sanandaji said. 

Finding a diverse array of tenants has become increasingly important for any office building, and the reasons are particularly evident in San Francisco, where the concentration of tech companies has caused deeper wounds in the office market than in other cities.

“We also want to create an ecosystem where there's a lot of diversity in the type of people occupying the building,” he said. “If you can curate a tenant roster that includes a handful of VCs, an investment bank, an [intellectual property] or patent attorney and an innovative tech company, as well as some coworking for smaller startups or other smaller users in professional services, it creates energy.”

Artificial intelligence companies, finance firms and law practices have been among the most active companies seeking office space in San Francisco.

For property management, Presidio tapped its sister company Main Post, a firm that brings a hospitality-driven approach that includes events for tenants. 

“It doesn't feel great if you go into your office and you're the only one there in a massive open desk space. There's no energy. So, it's all about creating density, creating interaction and creating a reason for people to want to engage with one another,” Sanandaji said. “Whether they're on the same team or just share a building, it gives them something to look forward to. That’s our view of what the future built environment needs to look like.”