- Ian Jacobs, 47, has decided to buy an estimated $900 million worth of office space in San Francisco.
- Heir to Reichmann real estate dynasty sets $75 million commitment for new business venture
- Office vacancies have increased significantly in the Bay Area
A real estate mogul plans to buy an estimated $900 million worth of office space in San Francisco that has been left vacant due to homelessness, crime and a work-from-home culture.
Ian Jacobs, 47, heir to the Reichmann real estate dynasty, has decided to expand his family business to California.
Mr. Jacobs, who is known for making his fortune building famous skyscrapers in New York City, London and Toronto, is working with his real estate company and other wealthy families and investors to improve deteriorating cities. I've been fighting against it.
He set a $75 million commitment for a new business venture dubbed “Project Uris.” Jacobs told investors the Bay Area project could take 10 years, according to marketing materials.
“His entire professional career has involved value investing in the public markets. This is the first time he has been able to make value investments in real estate,” said Max Raskin, Jacobs' project advisor. told the Wall Street Journal.
Jacobs' goal is to buy 3 million square feet of office space for about 70 percent or less of what it would cost to build the property, according to his marketing materials.
Recent building sales in San Francisco are between $200 and $300 per square foot, according to the paper, and Jacobs' plan would cost about $900 million.
He spent much of last year raising money from his family and other Toronto-based real estate groups, and received further funding from family offices in Latin America and the United States.
The billionaire stressed that his window to buy vacant buildings in the Golden State could close soon if the Federal Reserve chooses to cut interest rates in the new year.
This effect could encourage other investors and fund managers to return to the city, his co-investor said.
Sources said Jacobs has made bids on a number of properties, but no deals have yet been finalized.
The Reichmann family honed their skills as entrepreneurial businessmen as Jacob's great-uncle Paul and Albert became involved in the development of the Big Apple's World Financial Center and London's Canary Wharf.
Today, Canary Wharf's skyscrapers are instantly recognizable and home to some of the world's biggest banks, including Citigroup, Barclays, Credit Suisse and HSBC.
In 1977, at a time when crime was rampant in Manhattan, the family empire decided to take on New York City and purchased eight buildings in Manhattan.
Five years after the purchase, the local economy was booming and the value of the purchased building was 10 times its original value.
San Francisco has recently seen an increase in vacant office buildings and stores throughout the city.
In October, Microsoft joined the Bay Area's “tech-xodus,” touting up to 49,000 square feet of office space to sublease as the city continues to slip into a “loop of doom.”
Meta and LinkedIn are also subletting office space in the city as rising crime drives storefronts out of downtown areas and vacancy rates hit a record 34% in September.
San Francisco, a city long popular with tech companies, has also been hit hard by the pandemic due to its densely packed offices.
Chris Roeder, executive managing director of Jones Lang Rusal in San Francisco, told Al Jazeera: “Nearly 80 percent of the space in downtown San Francisco is office space, but it's a lot more residential in New York and elsewhere. “It's different than most cities.”
At the same time, the city is also plagued by rampant fentanyl use and fatal overdoses. In the first five months of 2023, there were nearly 346 overdose deaths in the city, an increase of more than 40 percent compared to the same period in 2022.
A homeless population has also taken over the city, displacing businesses and even residents.
Another business mogul, Quicken Loans founder Dan Gilbert, took on a similar role when he moved his company to downtown Detroit in 2010.
At the time, the city was in financial trouble and on the verge of declaring bankruptcy, but Gilbert swooped in and bought the property.
He began buying and developing real estate through his real estate company, Bedrock. Currently, the company owns approximately 100 properties, raised $5.6 billion, and increased the residential population to his 98% occupancy rate.
An astonishing 19.6 percent of office space in the United States is vacant, the highest vacancy in 40 years.
Office space in major U.S. cities was unleased at the end of the fourth quarter, with the amount of vacant space increasing 18.8% compared to last year, according to Moody's Analytics.
