A prominent fixture along the San Francisco skyline, known as much for its high-profile ownership as well as its size, is set to soon lose two longstanding tenants in a combined move that's expected to drive the office tower's vacancy to its highest point in nearly two decades.
Two law firms are planning to vacate their spaces in the Bank of America Tower at 555 California St., a 55-story skyscraper owned through a joint venture between the Trump Organization and Vornado Realty Trust. Fenwick & West and Sidley Austin LLP plan to relocate to properties elsewhere in downtown San Francisco once their leases expire early next year, moves that will collectively empty four complete levels in the more than 1.5 million-square-foot tower.
Fenwick, which moved into the high-rise about three decades ago, finalized a deal late last month to move its office to One Front Street, landlord Paramount Group confirmed to CoStar News. The 50,000-square-foot deal will be a substantial downsizing compared to the nearly 86,000 square feet the tech-focused law firm currently leases at 555 California St., echoing moves made by other companies across the country in adjusting their real estate footprints as they upgrade to space in newer or recently renovated properties.
"What stood out to Fenwick & West — and to other prospective tenants with whom we're engaging — is our amenity plan, which has been a catalyst for increased leasing activity," David Eaton, Paramount's senior vice president of leasing, said in a statement to CoStar News.
Meanwhile, Sidley is preparing to uproot its longstanding hub in the Trump-owned tower and relocate to Hines' 101 California St. high-rise several blocks closer to the waterfront.
Instead of using the move to downshift its space, the law firm is expecting to largely retain its current footprint. Sidley has committed to about 53,000 square feet for its future office, a rough equivalent to the more than 54,000 square feet it currently leases in the Bank of America Tower.
While far from devastating, the pair of losses will deal a hit to 555 California's impressive occupancy streak. Since Vornado acquired its stake in the building as part of a $720 million portfolio purchase roughly two decades ago, the landlord has reported an average occupancy rate of more than 96% for the tower, according to information filed with the Securities and Exchange Commission.
What's more, the property's occupancy rate has never dropped to less than 91.7% since that 2007 acquisition, a feat that could be at risk if Fenwick and Sidley's spaces aren't quickly backfilled with replacement tenants.
The two firms collectively lease less than 10% of the building, according to public filings, which was 96.6% occupied by year-end 2024.
Neither Vornado nor the Trump Organization responded to CoStar News' requests to comment.
Shopping for space
Among the tenants that are shopping around for space, many are focused on making deals for the newest and nicest options. That flight-to-quality trend has decimated occupancy among older office properties. However, for recently constructed or renovated options, there has been a recent pickup in demand as companies look to leverage their office space as a tool to both retain and recruit talent.
That gradual rebound has been slow to gain steam in San Francisco, one of the markets hit hardest by the fallout from the pandemic, largely due to its longstanding dependence on the tech industry.
The city continues to face one of the nation's highest office vacancy rates due to pandemic-induced headwinds. Property valuations have plummeted in recent years, mainly because San Francisco has been more affected by flexible work than any other market in the United States, according to a CoStar analysis.
Tech companies such as Meta, Salesforce, Dropbox and Pinterest that had previously fueled the regional office market have collectively dumped millions of square feet over the past half-decade, driving San Francisco's availability rate past 26%, according to CoStar data.
While the recent string of move-outs and relocations has created challenges for some landlords, others, such as Hines and Paramount Group, are trying to position themselves on the winning end of the city's slow-but-steady rebound.
After wrapping up a massive capital improvement plan on its 101 California tower, Hines recently scored a 112,000-square-foot deal with locally based law firm Morrison Foerster.
For Paramount, the New York-based real estate investment trust recently sold a 25% share in the One Front Street tower as part of a deal in which proceeds from the nearly $64 million interest sale will be put toward a capital improvement plan aimed at upgrading the property and addressing some of its own large vacancies.
Making improvements and upgrades is an expensive task, however, and something cash-strapped landlords have been unable to pursue, even though it is a possible remedy for struggling properties.
For Paramount, selling a slice of its stake in the One Front Street tower will free up some capital to help make it possible. It also reaffirms the REIT's long-term bet on San Francisco's office market recovery as it prepares to kick off upgrades across its regional portfolio.
"We're rolling out a similar concept at One Market Plaza," Paramount's Eaton said, adding that the investments "reflect our long-term confidence in San Francisco's improving business climate and leasing momentum."