A Florida real estate firm just made its first bet on downtown San Francisco, and the building it picked comes with a built-in tenant: Google. 1754 Properties closed on a six-floor office building at 40 Jessie St. at the end of October for nearly $28 million, according to city records, marking the company's first investment in the city and its first-ever office purchase.
The deal, made alongside Vander Capital Partners, was reported by The San Francisco Standard, which noted the purchase values the building at roughly $10 million more than when Long Market Property Partners bought it from Golden Gate University in 2023 for $17.6 million. The building at 40 Jessie St. is occupied entirely by Google, whose lease runs through 2030, according to the Standard's reporting, and about 60% of the space is designated lab space.
A Florida Hotel Specialist Pivots to Bay Area Offices
1754 Properties CEO Joe Smith told the outlet his company is looking well beyond this single purchase. “We're very excited about San Francisco and would love to build a larger portfolio in the Bay Area,” he said, adding that the firm is seeking similar office buildings and local partners to expand its footprint in the city.
Notably absent from that expansion plan: hotels, which is 1754's specialty elsewhere. Smith said hotels are off the menu in San Francisco because of “the high concentration of unions and the high cost of labor,” per the same account. The firm's portfolio currently includes hotel properties in Florida and Mexico, according to the report.
Betting on a Recovering Office Market
Smith pointed to San Francisco's improving commercial real estate conditions as the reason for the firm's interest, citing the city's artificial intelligence sector, leasing momentum, and a declining office vacancy rate, now below 30%. “You have a leasing market that's probably the best it's been in 12 years,” he told the Standard. He said he expects single-digit office vacancy rates in the city within four or five years, and anticipates more investment money flowing in from around the country.
Those figures track with broader market data. San Francisco's overall office vacancy rate stood at 26.0% at the end of the third quarter of 2026, down from a 2024 peak of 32%, according to Kidder Mathews. The firm also reported positive net absorption of 1,068,105 square feet for the quarter and 2,752,556 square feet year to date, alongside leasing activity of 3,036,496 square feet in the third quarter alone — up 33.8% from the same period in 2025. Kidder Mathews said it expects the strengthening market to persist as demand broadens beyond AI and technology firms.
Out-of-State Money Keeps Flowing In
1754's purchase adds to what the Standard described as a slew of out-of-state investment in San Francisco real estate. A Texas investor began buying up Union Square properties last year, the outlet noted, as did the duo behind Project Uris, and foreign investors new to the city scooped up both the Transamerica Pyramid and Ghirardelli Square this year.
Other recent San Francisco office deals show just how varied the pricing has been. The Real Deal reported that Strada Investment Group paid $103 million, or $771 per square foot, for the 133,427-square-foot One De Haro building, fully leased to Samsara, while StartupHQ picked up the 100,000-square-foot building at 55 New Montgomery for just $20 million, or $200 per square foot, in April. Investors poured $1.7 billion into San Francisco office deals in the first half of the year alone, compared with $1.9 billion for all of last year, the outlet reported, with institutional investors driving much of that activity on growing confidence in the city's AI ecosystem.
Not every deal has gone smoothly. New York-based Madison Capital took control of the more than 606,000-square-foot tower at 45 Fremont for $265 million through a deed in lieu of foreclosure, per the same report, while Yoda PLC paid $691.6 million, or $922 per square foot, for the 750,000-square-foot Transamerica Pyramid complex. Other local investors have leaned into steep discounts: Flynn Properties bought the Market Center towers in 2025 for $177 million, 76% below their previous sale value, after picking up a Class B building at 631 Howard St. for about $36 million the year before, according to the Standard's earlier reporting on the city's pandemic-era real estate bets.
