A Year Later, Centennial Towers Still Without a Tenant

The bad economy has forced a halt to construction on the second tower until a tenant is found for the first office building.

The gleaming 12-story office building sits perched above Highway 101 at the base of San Bruno Mountain, its curving façade a shiny landmark to commuters and visitors driving past.

But more than a year after construction on the first of two planned buildings in the Centennial Towers complex was completed in April 2009, its 325,000 square feet of raw office space sits empty, still waiting for a tenant.

With its high-profile location, the city had hoped the buildings would be a symbol of business development and pushed for an iconic design.  The eminent modern international architecture firm Skidmore, Owings & Merrill created an exterior for the south tower meant to evoke a sail.

"We held his [developer Jack Myers'] feet to the fire because we wanted something signature," said city council member Karyl Matsumoto.

Centennial Towers is largely the victim of bad timing.  After Myers got city approval for the building plan in the fall of 2006, he broke ground in April 2007.  With funding help from San Francisco-based financial partner Stockbridge Real Estate Funds, the Myers Development Company, also based in San Francisco, started construction without a tenant agreement, though the developer had entered talks with Sony about leasing the building. 

But as the financial crisis worsened over the next year and half, Sony decided go with a less expensive location.  By the end of 2008, with no tenant and construction nearly complete on the first building, Myers decided to delay construction of the second building.     

"Sony wasn't the only one deciding to pull back from moving forward in general," said Centennial Towers general manager Sarah MacIntyre, referring to the financial crisis.  "I think everyone's still recovering."

Now MacIntyre is still looking for a tenant to take over the building, which includes a day care center and a performing arts space.  Construction won't start on the 21-story North Tower until the South Tower is occupied. 

When the project broke ground, Myers told the San Francisco Business Times that he expected tenants to pay $60 per square foot.  Now, MacIntyre says leasing rates will be specific to the tenant.  Earlier this year, the San Francisco Business Times reported that rents on large office spaces were down 25 percent.

"The market has forced us to adjust our thinking," she said.

Centennial Towers is just the latest phase in a series of development projects on and around San Bruno Mountain.  Myers, who made his name as a developer in Hawaii and has developed prominent office buildings in downtown South San Francisco, also completed residential developments in Terra Bay in 2003 and 2004. 

Environmental and tribal claims on the mountain have made development controversial, and the Centennial Towers plan included a land preservation set-aside where the developer deeded land back to the county.

MacIntyre couldn't predict when she will find a tenant.  But she believes the development, which will eventually include retail and restaurant space, will prove useful to South City.

"We hope to get a high-caliber tenant, and I think they will bring cache," she said.  "It brings jobs, and more people eating here and exploring the secret nooks and crannies that South City does have."

Laura Dudnick September 08, 2010 at 10:46 PM
Great story, Drew! And congrats on the launch!


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