SF’s Commercial Real Estate: Signs of Recovery as Hines Bets Big

The San Francisco commercial real estate (CRE) market may be turning a corner as 2025 approaches. Hines, a global real estate investment, development, and management firm, has made a significant move in the city, signaling confidence in the market’s potential for recovery.

A Bold Bet on San Francisco

In a strategic financial decision, Houston-based Hines, along with its partner, the National Pension Service of Korea (NPS), recently paid off a $500 million loan on a 1.7 million-square-foot property in San Francisco’s Financial District. This property, once Pacific Gas & Electric’s (PG&E) headquarters, occupies a full city block and includes a one-million-square-foot office tower at 77 Beale Street, a 600,000-square-foot historic building at 215/245 Market Street, and a two-story parking garage at 50 Main Street.

Hines and NPS acquired the property in 2021 for more than $800 million, with plans to redevelop the site into a mixed-use campus. Initial proposals included modernizing both office towers and replacing the parking structure with a residential tower featuring 800 units. However, those plans have yet to move forward.

According to Dan Snider, chief of staff for San Francisco’s planning department, the development application remains active, though work on the project is currently paused. “They’ve requested that the application remain active and stressed their continued intent to pursue development at this site,” Snider told the San Francisco Business Times.

A Positive Global Outlook

Hines’ commitment to the San Francisco market coincides with the firm’s broader optimism about the global real estate landscape. In its recent report, A New Dawn: Seizing Real Estate’s Moment of Opportunity, Hines expressed confidence in the industry’s trajectory.

“We believe a new era of recovery and opportunity is upon us,” said David Steinbach, the firm’s global chief investment officer. “As many central banks have begun cutting interest rates, fundamentals are improving, more capital is coming into markets, and global growth is showing signs of strength.” (Source: Wall Street Journal)

The report indicates that 66% of global CRE markets are now in some phase of the “Buy” cycle—the highest level in eight years. This optimistic outlook suggests that strategic investments made in 2025 could position investors for significant gains in the coming years.

San Francisco’s Market Dynamics

The San Francisco office market has faced significant challenges since the pandemic, with high vacancy rates and shifting demand patterns as companies reassess their space needs. Yet, Hines’ actions signal a belief that the city’s core strengths remain intact. With its established infrastructure, access to top talent, and proximity to innovative industries, San Francisco continues to attract long-term investment.

“We’ll likely look back on 2025 as a pivotal moment of recovery in many areas of the commercial real estate sector,” Steinbach added. “For investors, we believe the time is now to reposition portfolios as the window opens in the year ahead.” (Wall Street Journal)

Challenges and Opportunities Ahead

While the loan repayment demonstrates optimism, not all Hines projects in San Francisco are moving ahead. The firm’s Parcel F development—a proposed 61-story tower featuring a hotel, residences, and office space—remains on hold. Approved in 2021, the project was listed for sale in mid-2023.

The mixed signals reflect broader market uncertainty but also underscore the potential for well-positioned assets. As interest rates stabilize and leasing activity increases, investors may find opportunities in repositioning underutilized office properties for new uses, such as life sciences or residential conversions.

The coming months will test the resilience of San Francisco’s CRE market, but if moves like Hines’ recent loan payoff are any indication, the city’s long-term potential continues to attract significant capital.

Source: Globest