City eyeing office space near City Hall

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The City is eyeing at least three of the largest buildings near Civic Center to purchase for government office space — but the city government’s recent shrinking act means there’s no urgency to make a deal.

Talks are ongoing between The City’s real estate division is and the owners of three massive buildings in the immediate vicinity of City Hall. The City hopes to move out of its rented offices at Fox Plaza and 875 Stevenson St. and lease — with the option to purchase — a building with as much as 1 million square feet in office space, according to Real Estate Division Assistant Director John Updike.

Updike confirmed The City is in talks with the owners of at least three properties: the massive and historic San Francisco Furniture Mart, at 1355 Market St., between Eighth and Ninth streets, the former AAA headquarters buildings on Van Ness Avenue and Hayes Street, and Bank of America’s massive tower at 1455 Market near 10th Street.

The Furniture Mart is one of the largest in San Francisco and is undergoing significant renovation. The AAA buildings include the slender white tower at 100 Van Ness Ave., and the two squat, aquamarine buildings on either side of Hayes Street between Van Ness and Polk Street, linked by a bridge walkway above traffic. A deal for the mammoth Bank of America tower looked like it might be a go late last year but has not progressed as well as The City hoped, Updike said.

The City recently moved offices out of a floor it was renting at 875 Stevenson and moved those workers into offices that are already city-owned, thereby saving The City $1 million. There may be more savings to be had if The City consolidates more offices, but negotiations over the price of a building have not been simple, what with the flux in the real estate market caused by the recession, he said.

A year or two ago there was more urgency to make a deal, but since the recession has forced The City to shrink its work force, time is now on The City’s side, Updike said.

Currently, The City has four leases for offices at Fox Plaza, and others at 875 Stevenson. The City has recently decided to renew two of the Fox Plaza leases for five years, to buy itself more time to find a new building, Updike said.

Commercial broker Frank Fudem of NAIBT, who produces a quarterly analysis of commercial space on the market, said the time is right for The City to be looking at real estate, since there is so much of it available right now.

“This is one of the unusual times when that magnitude of vacancy that close to City Hall is available, at a time when market conditions are somewhat favorable for buyers,” he said.

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