JPMorgan Chase will make a large withdrawal when it comes to its San Francisco offices as it prepares to dump about 70% of its space in a downtown tower.
The New York-based banking giant is planning to offload roughly 244,000 square feet in the One Front Street office tower once the lease expires June 2025, according to marketing materials viewed by CoStar News. The move adds to the space JPMorgan has already shed in the 38-story building following its acquisition last year of First Republic Bank, the building's largest office tenant prior to its early 2023 collapse.
Within weeks of acquiring the failed bank, JPMorgan gave back 116,716 square feet, or about a quarter of the 460,726 square feet that First Republic had previously occupied. While it initially assumed the remaining 344,010 square feet, JPMorgan's latest plans confirm lingering doubts of the bank's long-term commitment to the downtown space.
As a result of pandemic-induced headwinds, San Francisco faces one of the nation's highest office vacancy rates as the amount of space tenants have collectively vacated has long exceeded new leasing demand.
Paramount Group acquired One Front Street in late 2016; earlier this summer the firm warned analysts that it expected the bank to leverage its looming lease expiration in order to further shrink its footprint in the nearly 667,150-square-foot property. Peter Brindley, the landlord's head of real estate, said on the company's second-quarter earnings call that Paramount was in active discussions with JPMorgan to "keep some component" of the soon-to-expire space.
Those negotiations appear to have fizzled, however, with Paramount enlisting help from JLL to help market the space ahead of the financial heavyweight's departure.
The listing is the latest bruise for San Francisco's record-high office availability rate, a figure that has soared in recent years as the city struggles to regain its pre-Covid momentum.
Another setback
In addition to One Front Street, JPMorgan's acquisition of First Republic Bank also included the assumption of two other downtown San Francisco office leases: the failed bank's former headquarters at 111 Pine St. as well as an ancillary office several blocks away at 388 Market St. All told, the three offices totaled about 600,000 square feet, according to CoStar data.
All of that came in addition to the 223,000-square-foot office JPMorgan leases nearby at 560 Mission St., space that's slated to expire in September 2025. The bank has leased space in the CommonWealth Partners-owned property for more than two decades, according to CoStar data, and has been gradually consolidating it and First Republic's workforce in the nearly 667,800-square-foot building.
With its pending One Front Street downsizing it isn't yet clear what JPMorgan plans to do with its Mission Street office. The bank did not immediately respond to CoStar News' requests to comment.
While there have been some signals that show downtown San Francisco has hit rock bottom, the Financial District is still facing a roughly 30.5% vacancy rate, according to CoStar data, a staggering spike compared to the less than 7% rate reported in early 2020.
An unprecedented influx of sublet listings over the past several years has also pushed the neighborhood's availability rate to surpass 34%, exacerbating the challenges landlords such as Paramount Group face in competing to fill their properties' vacancies.
At One Front Street, the building's vacancy rate has jumped to about 56%, according to CoStar, and is set to climb even higher once law firm WilmerHale moves out of its roughly 24,000-square-foot space ahead of its relocation to 50 California St.