July 18, 2023Updated: July 18, 2023 6:01 p.m. (SFChronicle.com)
Could city office workers help revive downtown San Francisco?
In an effort to both pump new life into downtown office buildings and create opportunities for housing development elsewhere, Mayor London Breed on Tuesday asked the city’s real estate-owning agencies to look into whether they might be able to take advantage of the depressed market to lease space in the Financial District.
Breed is targeting the San Francisco Unified School District and San Francisco City College, as well as the City Administrator’s Office, which she oversees. That office includes the Department of Real Estate, which operates real estate services for 27 agencies across the city.
Breed said that the public agencies can “lead on recovery by investing in high-quality office space for workers” while freeing up other land or buildings for housing.
The initiative, unveiled at the Board of Supervisors, is part of Breed’s Roadmap to Downtown San Francisco’s Future, which includes cutting red tape and lifting zoning restrictions to make it easier to repurpose buildings for different uses.
“As the largest employer in the city we can lead on recovery by investing in high quality office space for our workers,” she told the board.
In the letters to the three agencies, Breed said the shift to hybrid work has “resulted in an overall reduced demand for office space and correspondingly lower rents for high quality buildings.”
A new report from McKinsey and Co. said that San Francisco asking rents have fallen 28% since 2019 while transactions plummeted by 79%. The city’s office vacancy rate has reached an all-time high of over 31%.
“While this poses a challenge to the City’s finances and its overall economic recovery, it also presents a critical opportunity for the City government to be strategic about its own use of office space,” Breed wrote. “The City alone cannot fix all of the problems impacting downtown San Francisco; however, we can lead the path toward recovery.”
In the letters, Breed requested that the agencies analyze their real estate portfolios and develop a strategic plan “that supports our economic recovery.” The analysis, due in 30 days, should include documentation of current office space leased and owned as well as information on the annual lease or maintenance cost for those spaces.
Colin Yasukochi, research director for the brokerage CBRE, said “a greater presence from city government would certainly be welcomed” in the heart of downtown.
“There is an abundance of large blocks on the market and the city is one of the largest occupiers of space in the city,” he said. “It could help activate and energize downtown.”
For a boom-and-bust city that has regularly had among the highest office rental rates in the U.S., the chance for the city to grab bargain space in a quality building is worth investigating, according to Anne Taupier, director of real estate development for the Mayor’s Office of Economic and Workforce Development.
“It’s not an opportunity that comes along very often in San Francisco,” she said. “Let’s look at ways to take advantage of the shift in the market and be part of the reinvestment.”
Meanwhile, city-owned buildings, including mothballed San Francisco Police Department properties, could make for good infill housing sites. “Some of them are in really great residential locations,” she said.
One potential target could be 1 South Van Ness, currently the headquarters of the San Francisco Municipal Transportation Agency. The drab 500,000-square-foot, eight-story building at South Van Ness and Market streets sits at a busy intersection that has been rezoned for increased heights. To the south it abuts 30 South Van Ness and 1550 Mission, a public-private partnership that includes a new city office building and a 550-unit apartment tower. Other projects in the works around that intersection include Hayes Point, a 47-story residential and office building under construction at 30 Van Ness Ave., and approved towers at 30 South Van Ness Ave. and 1 Oak St.
Taupier compared the new state-of-the-art city office building at 10 South Van Ness, which houses planning, public works and the department of building inspections, to the outdated SFMTA building next door at 1 South Van Ness.
“The only thing worse than the exterior of that building is the interior,” she said.
Reach J.K. Dineen: jdineen@sfchronicle.com
Written By J.K. Dineen
J.K. Dineen covers housing and real estate development. He joined The Chronicle in 2014 covering San Francisco land use politics for the City Hall team. He has since expanded his focus to explore housing and development issues throughout Northern California. He is the author of two books: “Here Tomorrow” (Heyday, 2013) and “High Spirits” (Heyday, 2015).
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