This week, San Francisco will host a four-course feast at the Ferry Building, commemorate The City\u2019s circus history and throw neighborhood street festivals.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n<\/div>\n<\/div>\n

The new tax break “gives developers a way to put together a financing package that can make conversions work,” said Chris Pearson, senior vice president of Hudson Pacific.<\/p>\n<\/div>\n

The incentives are also playing an important role in the city’s Future of Downtown initiative, a rebuilding program the city’s planning department introduced in 2023.<\/p>\n<\/div>\n

San Francisco’s office vacancy rate, though improved recently, is among the highest in the country at 30.1%, according to Cushman & Wakefield, a commercial real estate brokerage. City officials see more people living downtown as a way to keep the area lively well past 5 p.m. and on weekends. That requires a mix of housing, shops, restaurants and entertainment, said Jacob Bintliff, manager of economic recovery initiatives for the Office of Economic and Workforce Development.<\/p>\n<\/div>\n

“Everybody feels the pain of where downtown has been since COVID, and there has been a lot of political will to go further with incentives for this category of projects,” he said. “If we were proposing them for some other type of development, maybe we wouldn’t have the same political coalition.”<\/p>\n<\/div>\n

More of that type of development is needed to give developers confidence to build even bigger, said Steve Luthman, global head of real estate at Hines, a global real estate investor.<\/p>\n<\/div>\n

The company wants to redevelop a block in the Financial District that could include converting a late-1940s-era office building into housing along with constructing the tallest office skyscraper in the city containing a mix of offices, housing and retail.<\/p>\n<\/div>\n

But without a broad office conversion effort, the Hines project will remain an island in a district of underused office buildings, Luthman said.<\/p>\n<\/div>\n

“The Financial District has always been a single-use district, and every one of our cities in America has one like it,” he said. “So we believe that creating more experiential urban districts is a winning formula, and the leadership shown by a historically antidevelopment city like San Francisco is giving developers a palate for those projects.”<\/p>\n<\/div>\n

Even with the new incentives, the advent of AI is an unknown in the future of office conversions in San Francisco. Lately, leasing activity and office building values are rising, partly because of the increasing number of AI firms looking for space.<\/p>\n<\/div>\n

More office leasing activity could slow momentum for conversions, as building owners and lenders have become reluctant to part with buildings at a price at which a conversion works financially, Babsin said. But he is confident that more conversion opportunities will become available.<\/p>\n<\/div>\n

“There are a lot of AI startups generating a lot of headlines and a lot of buzz,” Babsin said. “Nonetheless, dozens of Class B and C office buildings continue to struggle, so we’re bullish on office-to-residential conversions and see an opportunity to bring new energy into downtown.”<\/p>\n<\/div>\n

This article originally appeared in The New York Times<\/a>.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"