Boston Properties Inc. (BXP), in collaboration with Hines, inked a deal with Salesforce.com, Inc (CRM) to lease around half of the new Salesforce Tower in San Francisco, CA – the proposed tallest office building in the U.S. west coast area. This is said to be the largest office lease deal in San Francisco’s history.
In particular, Salesforce.com will occupy 714,000 square feet on floors 1, 3-30 & 61 of this 1.4 million square foot property. The tower was previously known as Transbay Tower. Boston Properties and Salesforce.com have decided to rename the property as Salesforce Tower, after the deal execution.
The Salesforce Tower, which is currently under construction, is positioned at 415 Mission Street in the South Financial District of San Francisco. The 61-story building sprawling over 1,070 feet is a LEED Platinum pre-certified office asset. The construction at Salesforce Tower is projected to be complete in early 2017 for an estimated total cost of around $1.1 billion.
As a matter of fact, in March last year, Boston Properties along with Hines – a Houston-based real estate investor – acquired the land parcel next to the Transbay Terminal for the purpose of building the Transbay Tower. The company started construction at the property in the summer of 2013.
The abovementioned deal is a strategic fit for Boston Properties as it is expected to boost its strong diversified tenant base comprising several U.S. bellwethers. Moreover, the successful completion of this much talked about tower will strengthen its footprint in the San Francisco market – one of the 5 prime operational markets of Boston properties. With the improving San Francisco office market, the company is well poised to garner steady rental revenue from Salesforce Tower, upon completion.
However, with gradual reduction in the Fed’s support, interest rates are expected to increase, which may in turn hurt the rate-sensitive business of Boston Properties in the long run. Also, the office space efficiency trend is limiting any robust improvement in office market fundamentals.