San Francisco office-building sales may exceed $5.3 billion this year, the most since the market peaked in 2007, amid a technology-fueled rent surge that shows no signs of slowing.

Twenty-two downtown office properties changed hands through July 20, three deals were pending, and 10 buildings and two land parcels were listed and drawing investor interest, according to brokerage CBRE Group Inc. The average purchase price has risen to $465 per square foot, also the highest since 2007, when it was $516 per square foot on $8.6 billion of sales, data from the Los Angeles firm show.

San Francisco and Silicon Valley are "the two strongest" U.S. office markets, research firm Green Street Advisors Inc. said in a July 24 report. Citywide, average office rents jumped 28 percent in the second quarter from a year earlier as Internet firms Airbnb, Twitter and Yelp signed new leases, according to CBRE.

"It's pretty easy to see why prices are escalating so quickly with a tech boom going on," said Dan Fasulo, managing director at property research firm Real Capital Analytics Inc. "It's a phenomenon taking place nowhere else."

Office rents may rise by another 25 percent over the next two years as tenant demand continues and supply remains tight, said Kenneth Rosen, an economist at UC Berkeley. More than half of the 2.6 million square feet of office space set to open by 2014 is already leased, brokerage Cassidy Turley estimates.

Seen as safe haven

San Francisco's "red-hot" market has lured pensions, closely held funds, real estate investment trusts and overseas buyers seeking perceived safe havens for their money, according to the Green Street report. Even with yields at 5 percent or lower, money is flowing to the city's commercial property because 10-year Treasury notes have sunk below 1.5 percent, said Jed Reagan, an analyst at the Newport Beach (Orange County) firm.

"International and domestic capital is looking to invest in gateway cities, and San Francisco qualifies in spades," said Richard Pink, managing director at New York real estate investor Clarion Partners. "It's got a tech industry that is strong and broad, and a quality of life that compares with anywhere in the world."

Clarion bought two San Francisco office buildings last month on behalf of pension clients, paying $180 million ($502 per square foot) for 600 California St. in the Financial District, and $147 million, or ($603 per square foot) for 475 Brannan St. in the South of Market area, according to Pink.

Billion-dollar prize

The biggest prize on the market is 101 California Street. The 1.25 million-square-foot cylindrical office tower near Market Street, site of infamous workplace shootings in 1993, may fetch as much as $1 billion, based on recent per-square-foot prices, said Russell Ingrum, vice chairman of CBRE's capital group.

Nippon Life Insurance Co.'s 92.4 percent interest in the building is up for sale through a U.S. real estate unit, according to marketing materials from listing broker Eastdil Secured LLC. The 48-story tower, developed by Houston real estate investor Hines and designed by renowned architect Philip Johnson, is 92 percent leased and offers a central location and breathtaking views, Eastdil said.

The high-rise is the city's second-largest office building, behind Vornado Realty Trust's 555 California St., according to CBRE. Tenants include Bank of America Corp., with 122,000 square feet; Morgan Stanley, with 100,000 square feet; and Deutsche Bank AG, with 75,000 square feet.

"It's iconic, truly special and unique," Ingrum said.

Top price tags

The top price paid so far this year was $446.5 million, (about $802 per square foot) for 555 Mission St. That purchase was made in May by Germany's Union Investment Real Estate GmbH, according to CBRE.

The city's price record was set in June 2007 with Morgan Stanley's purchase of the One Market complex for $953 per square foot, CBRE said. The deal was financed largely by commercial mortgage-backed securities.

The only market that compares to San Francisco is New York's midtown south, an area popular with technology and media companies, Fasulo said. Across the country, office buildings in major cities had the biggest price gain of any real estate sector, rising 8.1 percent in May from February, according to Moody's/RCA Commercial Property Price Index.

Investing in San Francisco isn't without risk. Tech firms make up as much as two-thirds of the city's tenant demand, and buyers late to the cycle will be most vulnerable to a slowdown in a market known for booms and busts, said Reagan of Green Street. The 2001 dot-com collapse was followed by a 60 percent rent plunge, he said.

S.F. 'most volatile'

"San Francisco is the most volatile market in the country," Reagan said. "These investment strategies do raise some concerns, with the city so dependent on tech."

Recent office sales already value 101 California Street above the cost of replacing the building, usually an alarm signal, said Rosen, the UC economist. Construction of a building in the Financial District would be about $700 per square foot, said Pink of Clarion Partners.

San Francisco added 3,800 professional-service positions in June, a fourfold increase over the average monthly gain, while tech employment rose to the highest level since 2000, according to California's Employment Development Department. The office vacancy rate in the second quarter fell to 9.7 percent citywide, and to 4.3 percent in South of Market, CBRE data show.

Investors who recall the dot-com implosion and 2008 financial crisis know what they're getting into, and are assessing real estate with care, said Ingrum of CBRE.

"Today, people are much more rational and clear-eyed about risk," he said. "The cost of money is so low that you can pay more and still get the same return."