Hines, Boston Properties, Kilroy to Build Two Office Towers Near San Francisco’s Transit Center Project

Hines has formed a JV with Boston Properties for the development of a 1.4 million-square-foot high-rise and Kilroy Realty Corp. just announced that it will build a 400,000-square-foot tower.

San Francisco’s $4 billion Transbay Transit Center is in the works and now plans for two premier office buildings to sprout up nearby have come to the fore. Hines has formed a joint venture with Boston Properties for the development of a 1.4 million-square-foot high-rise and Kilroy Realty Corp. just announced that it will build a 400,000-square-foot tower. Both projects will sit practically a stone’s throw from the Transit Center.

Location is everything and Hines’ Transbay Tower and Kilroy’s project’s sites within close proximity to the 1.3 million-square-foot Transit Center, which is expected to debut in 2017, are the right locations.

“The key is that it’s on the Transit Center so that makes it an easy place to get to work, and it also makes it environmentally attractive because it requires people to drive in their cars less to get to this office building,” Paul Paradis, senior managing director with Hines, told Commercial Property Executive.

Hines is also the developer of the Transit Center, having been awarded the job by the Transbay Joint Powers Authority. The company just secured the final green light from the San Francisco Planning Commission to move forward with its Transbay Tower last week. With Boston Properties now onboard as a 50 percent partner in the office development, Hines is ready to wrap up its $190 million acquisition of the land for the project from TJPA. The anticipated completion of the transaction in the first quarter of 2013 will allow Hines and Boston Properties to take the next major step in developing the Pelli Clarke Pelli Architects-designed skyscraper which, at 61 stories, will carry the distinction of being the tallest building on the West Coast.

Kilroy’s project will occupy a nearly half-acre parcel at 350 Mission St., just across from the Transit Center’s main entrance. The company shelled out $52 million for the land where it will erect a 27-story tower. Skidmore, Owings & Merrill L.L.P is behind the design of the office property, which will be built to qualify for the U.S. Green Building Council’s LEED Platinum certification. If all goes as planned, 350 Mission will become the first ground-up commercial building in San Francisco to achieve the USGBC’s highest certification ranking.

Kilroy anticipates spending $200 million to complete the development, and the company has tapped commercial real estate services firm Jones Lang LaSalle to serve as brokers. Currently, San Francisco, the SoMa submarket in particular, is crying out for more Class A office accommodations, and there appears to be no end in sight. Jobs have a little something to do with expectations for the market’s continued success.

“If you look at the leasing velocity that’s been going on in San Francisco in the last 24 months, where we’ve absorbed almost 3.5 million square feet, you’ll see that there’s just a robust amount of fast-growing tech and media companies that are continuing to hire and appreciate being in the urban setting in the city,” Christopher T. Roeder, international director with JLL, told CPE. “We’re seeing not only regional and national companies relocating to San Francisco because of the workforce and the setting, we’re also seeing a tremendous amount of startups and medium-size companies grow larger.”

Timing, as location, is key. While the national office market is in rebound mode, developers aren’t exactly racing to kick off speculative office. But there are exceptions.

“There is very healthy demand in San Francisco from the tech sector and other sectors are starting to show more demand,” Paradis added. “We feel it’s fairly early in the economic recovery cycle and that makes it a very good time to consider launching a large office building.”