Australian developer Lendlease has called a time-out on Hayes Point, the company’s $1.2 billion mixed-use tower in San Francisco. The state-of-the-art skyscraper is slated to feature approximately 290,000 square feet of office space, 333 residential condominium units, and roughly 4,000 square feet of retail offerings. Construction scaffolding went up on Hayes Point in late 2022, and work commenced earlier this year, only to halt over a dispute with the Bay Area Rapid Transit.
This latest cessation of construction is all about the state of the real estate market. In its annual report for the period ending June 2023, Lendlease announced that “the project was recently paused pending further de-risking through either tenancy pre-commitments or the introduction of a capital partner.” A bit of credit has to go to Lendlease for having faith in a quick office turnaround, but such has not been the case in the U.S. and most certainly not in San Francisco. The Northern California city’s office market has been plummeting in 2023, plagued by major companies leaving, many spurred by the downtown area’s safety issues. And then there’s the problem with the housing market. Potential homebuyers are facing major financing hurdles with the current interest rates, and renters have a hard time finding affordable accommodations. Lendlease now puts the completion date for Hayes Point at Fiscal Year 2027, although the company has given no date for the resumption of construction activity. This news shows that, while there is still a strong demand for premier office space across the country, office construction in San Francisco right now is nothing short of a gamble.