San Francisco's arrested investment market is kicking back into gear after years of nonexistent activity, but sellers have been forced to reset their pricing expectations as office valuations across the city have fallen from their pre-pandemic highs.

Private equity giant Blackstone Group is the latest seller forced to reconcile property pricing with San Francisco's new economic reality, closing a deal in the city's Showplace Square neighborhood for roughly half of the price the firm paid to acquire the property in late 2016. Southern California investment firm LBA Realty finalized its purchase of the 600 Townsend St. building for $25.35 million late last month, a price tag that amounts to just over half of the nearly $50.5 million Blackstone paid to buy the 87,400-square-foot property.

The building had been fully occupied by Airbnb up until 2021 when the home-sharing platform listed it for sublease. JLL is now marketing the property as a direct listing, according to brokerage materials.

The price, at roughly $290 per square foot, is the latest in a string of office sales that have or will soon close and are collectively resetting owners' expectations as they come to accept the city's new era of office valuations.

Deal volume in the city is poised to regain momentum after hitting a near standstill in the years following the pandemic's 2020 outbreak.

However, the sale of 600 Townsend East underscores San Francisco's battered standing as one of the world's most expensive office markets that, before the pandemic, had benefited from years of rent growth and seemingly infallible leasing activity. A troublesome combination of widespread layoffs across the tech industry, a flight to top-tier properties, and stubborn hybrid work arrangements, among other pandemic-related factors, have collided to lower demand for office space in the city to levels not seen since the dot-com bust in the early 2000s.

No major property acquisitions have closed since 2020, and only about $675 million of office deals have been completed in the greater San Francisco area over the past year, according to CoStar data.

By comparison, more than $1.5 billion of office deals closed in all of 2019.

Plummeting tenant demand and the high cost of capital have meant recent sales prices and property appraisals show that values for distressed office properties have fallen by 50% or more below previous levels, according to CoStar analysis.

Yet the latest spurt of sales, while far off from the blockbuster deals that closed in the years leading into the pandemic, represents a vote of confidence in the city's eventual recovery.

LBA Realty declined requests to comment, and Blackstone did not immediately respond.