Competition for an Office Space Allocation in SF is Heating UpOctober 23, 2019
With over 2 million square feet of new office development having recently been approved and granted a coveted allocation from San Francisco’s bank of allowable “Large Cap” office development, the Proposition M limited pool to which 875,000 square feet of allocable space is added every October now totals 896,752 square feet. And that’s after this year’s allotment was added last week. With the constantly growing office spaces available come more businesses interested in locating or establishing themselves in the area. Businesses setting themselves up in new premises may want to use the services similar to tower leasing which help to equip, supply and support businesses and startups with everything they need to continue towards success.
At the same time, the pipeline of Large Cap developments in the works currently totals over 6 million square feet, including over 2.2 million square feet of space in developments which are likely to be competing for an allocation over the next quarter or two, developments which include the first phase of Mission Rock (500,000 square feet), the tower to rise on Transbay Parcel F (275,000 square feet), the One Vassar project (433,000 square feet), two buildings totaling 450,000 square feet of new office space at Pier 70, and the first phase of the Central SoMa project rendered above and now known as “Harrison Gardens” (500,000 square feet).
With that in mind, the City is now planning to revoke a number of earlier Prop M allocations that were either never or only partially used, but such clawbacks would only add another 227,000 to 486,000 square feet of allocable space to the bank, for a potential near-term deficit of at least 818,000 square feet over the next year.
We’ll keep you posted and plugged-in.
Comments from Plugged-In Readers
In addition to revoking previously allocated but unused space, I recently read that Mayor Breed is resurrecting the idea adding the footage of office space converted to other uses by way of a ballot measure to appear in the March 2020 voting.
Ironic that the 3 million feet of proposed office space at Lennar’s HP/CP is exempt from M and yet is languishing in limbo. With over 6 million feet of space in the works (which takes up over 7 years worth of M allotment) there will be a dearth of new office space in the next 3/4/5 years. Lennar, you’d think, would start build out as they are in the sweet spot. The only game in town for major new blocks of office space in the medium term future. Given the large backlog which will take years to clear, major new office project proposals will likely not be seen in SF for a long while. This is good for Badlands (or is it Baylands) in Brisbane. Up to 9 million feet of office space not to mention several million feet of additional space in SSF at Oyster Pointe. This is all good if it results in a shift of major office development out of SF. The City simply can’t accommodate more.
Ironic that just today Five Point (successor to Lennar) announced that they are formally greatly reducing the retail component to its CP development and more than tripling the office space with construction to begin early next year upon approval to be sought from Planning next week.
Five Points revised plan, which has actually been in the works since the first quarter of this year and has already been heard and approved by the City’s Commission on Community Investment and Infrastructure (CCII), now includes 750,000 square feet of office space in total, but that includes 118,000 square feet of space which was previously approved for the Hunters Point Shipyard portion of the master development (which will be transferred to Candlestick Point) and 150,000 square feet of office space which had already been approved.
At the same time, the total amount of new retail space for the neighborhood has been reduced from 760,000 to 304,000 square feet.
Also interesting timing considering recent news that Stripe moving their headquarters to Oyster Point, just a 5-10 minute drive south of Candlestick. Looks like tech interest in this location is expanding beyond just Biotech, which makes sense considering much easier access to the Peninsula compared to Soma, etc. 750k SF of Prop-M exempt office space seems like it would have the potential for HQ status. Construction in 2020 would be a smart move.
I believe they are increasing the office space of that particular component of the project – and correspondingly reducing the retail space. Overall HP/CP was approved for over 3 million feet of office space and, as far as I know, that has not changed. Aside from tweaks within the overall office/retail space by shifting some from retail to office use.
How is it good for the city? To lose commercial receptive tax AND affordable housing fees, which are a major source for funding new affordable housing in the city. Do you think people will move to South San Francisco which lacks housing options of its own and is certainly not on a level to compete with SF? I will answer the question for you, I do not work in biotech, but personally know many people who do. Most of them work in South San Francisco or other suburbs, they all LIVE in SF. So, with the shifting of the office space, SF gets none of the revenue from new office development, but all of the burden of having to house the workers that come with it. That is a bum deal under any analysis.
the Prop M limit makes absolutely no sense. why are we trying to keep business at bay?
Because NIMBYs in the 80s were trying to prevent “Mahattanization”, which itself was always and still is a total myth.
and because it ultimately takes a vote of the people to reverse it. And at a time like this (the end of a boom, lots of recent office development, lots of blame pointed at tech jobs etc on the housing affordability crisis) it’s extremely unlikely that the citizenry would vote to end Prop M. Sad, but true.
I don’t think there’s much, if any, polling to support that.
Certainly if your sample of respondents is made up of people who moved here from elsewhere to sell real estate because they felt they couldn’t compete with Fredrik Eklund, yes, I would agree that your poll results would indicate wildly high support for promoting the Mahattanization of San Francisco.
What? This is such a nonsensical statement. You couldn’t specifically target a group of people like that even if you tried, and it wouldn’t be a scientific poll even if you hypothetically could.
I think even Fredrik has moved on from Manhattan considering he now lives in LA. But, steering away from “reality” tv and back to reality, “Manhattanization” was a made up phenomenon used to scare mainly single-family homeowners in SF to support a restriction on office development, which completely failed to reduce or even slow the cost of housing in the city and ultimately only had the result of creating some of the most expensive commercial real estate in the nation, ensuring small to mid-sized businesses and non-profits got prices out of the city. Now, about the only businesses that can afford commercial space are Big Tech. People got exactly the city they voted for.
SF has historically hosted more jobs than residences and that results in forcing some percentage of employees to commute. One of the benefits of Prop.M is to balance the number of beds vs. desks by enabling more workers to live in the city where their job is sited.
A good bet is that Mission Rock gets its 500K of office space from the almost 900K available. Given its 40% BMR residential component. Plus the Giant’s organization has a lot of political influence in SF. One Vassar will be tied up in court for years. Parcel F won’t break ground anytime soon. That leaves Pier 70 which would take up all the remaining available space.
What are plans/ideas to repeal Prop M? SF has lots of space to grow and should to remain a world class city.
No repeal is in the cards. In fact a SOMA group has a ballot measure hoping to get on the March ballot that would restrict/tie the M allotment to SF achieving it’s affordable housing goals. If it falls 20% short then the M cap would be reduced by 20%. This measure will likely pass and it is the only way to force housing development as opposed to office development in SF. Stripe is looking at long-term expansion and it’s new SSF headquarters (moving 1000 plus employees out of SF) will allow it’s footprint to grow to 2.5 million feet as needed as the location is approve for that much office space. SF simply can’t build these large scale office projects anymore as are coming online in SSF and Brisbane. City residents, IMO, don’t want more large scale development of offices.
Again, there’s no data to support this claim. It may be your opinion that SF voters feel this way, but what evidence is it based on? Feel free to point to some if it exists.
So, Stripe moves to South San Francisco. SF loses both the commercial gross receipts tax and the development fees that fund affordable housing and the Stripe workers live in SF, not South San Francisco. South San Francisco gets all of the benefit and none of the burden, and SF gets all of the burden and none of the benefit. That is a crap deal for SF. If city residents are truly as misguided as you claim, then they may want to rethink what they want for your city.
It is a regional problem. SF can’t afford more office development with little affordable housing development. San Mateo County is guilty too. SSF has little housing in the works but millions of feet of office space in the works. Brisbane is worse. 9 million feet of office space (targeted specifically to draw companies from SF) and little housing. Oakland will see massive office growth. And that will help. The largest office building in the BA (short of Silicon Valley) is being built there and is fully pre-leased. That should spur more million plus office structures in Oakland. The mega office structures in Brisbane and SSF and Oakland can’t be built in SF – forget the housing, there is no place to build them. So a significant shift of jobs to Oakland and SSF/Brisbane from SF is coming. Stripe is just the precursor. This will make a difference for the region. Oakland should be the focus of major new office development it the north side of the Bay. Given its far more advantageous position to centers of affordable housing east of Oakland. If there was a regional government these zoning “restrictions” limiting office development in SF and pushing it to Oakland and other East Bay locations would have long ben in place.
There is no regional government, nor any plan to put one in place. Also, with the recent central SOMA rezoning, there certainly is space to build new office projects. In fact, your comment makes no sense, as if there were truly no physical space to build new office buildings in SF, there would not be more commercial projects in the development pipeline, then Proposition M office space allocation. Developers would not propose projects where there is actually no space to build. The office space restriction is entirely artificial and caused by the Prop. M limitations.
And, again, artificially creating a situation that prices out small and mid-sized businesses and non-profits while ensuring only Big Tech can afford office space in the city, while simultaneously cutting off future affordable housing fees and commercial gross receipts taxes to SF, but still leaving SF with a growing housing shortage, does nothing to help SF. It only serves to make the situation worse, and ensures more and more people will get pushed out of SF. With new office projects in South San Francisco, the last few relatively affordable areas of San Francisco’s southern neighborhoods will continue to rapidly gentrify as workers will live there, a short drive away from South San Francisco, which has no plans (nor any desire) to build any large new housing projects. South San Francisco is happy to get the development fees and new taxes and let San Francisco deal with housing the workers.
apropos to this post, Stripe leaving the city
UPDATE: With respect to Harrison Gardens: Key Central SoMa Development Refined, Slated for Approval.
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