Top California Markets for Office Transactions

The U.S. office sector is yet to stabilize following the pandemic, still fighting an uphill battle. Although giant companies such as Amazon and Dell are implementing multiple return-to-office policies, fundamentals such as the vacancy rate continue to suffer across California metros.

However, office sales closed at a somewhat steady pace. A total of $23.8 billion in investment volume was registered nationally year-to-date through September, with assets changing hands for $171 per square foot on average, CommercialEdge data shows. This only marks a slight decrease compared to 2023’s same time frame, when sales totaled $25 billion. During that interval, properties traded for $198 per square foot.

California’s office transactions volume clocked in at $4.2 billion. About 16.9 million square feet across 159 properties sold for an average of $251 per square foot. The following list shows the leading top markets for office transactions in the state in the first three quarters of the year.

1. The Bay Area

The leading market for transactions in California year-to-date as of September was the Bay Area, which registered more than $1.8 billion in office investment volume. Sales in the metro comprising the San Jose area and the East Bay more than doubled year-over-year. Additionally, the market ranked third nationally, being surpassed only by Manhattan ($2.7 billion) and Washington, D.C. ($2.0 billion).

Despite the considerable growth in investment, office distress is still affecting the Bay Area, with the average price per square foot dropping year-over-year. Assets traded for an average of $278 per square foot in the first three quarters of this year, a significant decline from the $348 per square foot registered during the same interval in 2023.

In September, Behring Cos. purchased 1950 Franklin St., a 446,998-square-foot office building in Oakland, Calif., for only $14.4 million. This means the high-rise changed hands for a little more than $32 per square foot.

2. Los Angeles

Los Angeles remained the priciest market in the state and regionally, with properties trading for $345 per square foot through the first nine months of the year. However, the metro has been surpassed by Austin as the nation's leader in sale prices, with assets averaging $379 per square foot.

Total L.A. sales amounted to just under $1 billion during the same time frame, ranking second in the top markets for office transactions in California. This accounts for less than half of the roughly $2 billion registered in the same interval in 2023. Despite the huge volume shrinkage, the price per square foot increased by nearly $40.

At the beginning of the year, The Regents of the University of California paid $700 million for a pair of office assets dubbed One Westside and Westside Two. Hudson Pacific Properties and Macerich sold the recently redeveloped buildings totaling about 687,000 square feet.

3. San Diego

Despite San Diego being a hotspot for investors, the metro’s average price per square foot year-to-date as of September was $196, the lowest compared to the other major markets in the state and this ranking, but still above the U.S. figure. On average, properties traded for nearly half the price registered during the same period of 2023.

Total sales in the market reached $447 million, marking an almost 34 percent drop year-over-year. One of this year's most notable transactions was Breakthrough Properties’ purchase of a 65 percent stake in Callan Ridge, a two-building life science development. The fully leased property traded for $236 million.

4. San Francisco

Rounding out the top markets for office transactions in California is San Francisco, where office sales in the first three quarters of the year totaled $339 million. This marks a 40 percent decrease year-over-year, as investments reached about $571 million in the same interval of 2023.

Assets in the metro traded for an average of $268 per square foot, a considerable decline from the $321 per square foot registered during last year's same interval. In September, SC Properties paid $37.5 million—about $160 per square foot—for San Mateo Gateway Center, a 235,000-square-foot office campus. The complex changed hands for less than half of its pre-pandemic price.