San Francisco Spurs Construction to Attract Residents
Real-estate developers are embarking on an array of residential projects in San Francisco, spurred by recent state and city initiatives to boost housing in one of the nation’s most expensive areas. Bayhill Ventures, a local property developer, unveiled plans for a 71-story rental tower in the city’s financial district, marking one of the most ambitious residential developments in years.
Additionally, there are ten proposals for office-to-residential conversions across various neighborhoods, potentially adding over 1,250 units to the city’s housing stock. Developers attribute these plans to government efforts aimed at reducing construction costs and cutting through bureaucratic hurdles. San Francisco and the state have made policy changes to facilitate new construction and office-to-residential conversions. These include altering rules for market-rate apartment developments, reducing environmental reviews for some multifamily projects, and other measures to encourage housing initiatives.
Affordable-housing advocates, while acknowledging some compromises, have reluctantly accepted these changes in light of the urgent need to revitalize the housing market. The city’s past housing crisis, intensified by stringent development regulations, contributed to soaring rents. The pandemic-induced exodus and work-from-home policies further impacted the city, resulting in vacant offices and commercial spaces.
To address the housing shortage, San Francisco has shifted its focus, making it easier to convert office spaces into market-rate housing. With a record 25% office vacancy rate in late November, developers and city officials are keen on residential projects, given the rebound in San Francisco rental apartments compared to other commercial sectors. While apartment rents have shown signs of recovery, some properties are still grappling with below-pre-pandemic rental levels.
Bayhill Ventures anticipates completing the government approval process for its 71-story tower by next summer, aiming to set a new standard for rental housing in San Francisco. However, securing construction financing remains a challenge in the current high-interest-rate environment. If the project progresses as planned, it is expected to open in 2028, offering top-of-the-market rents exceeding $8,000 per month for a 1,000 square foot apartment.
The proposed tower, comprising 672 units, will feature 30,000 square feet of amenity space and a bridge connecting it to Salesforce Park. Changes in state law have relaxed previous requirements, allowing the tower to forego balconies or specific open space regulations. The overall land-use approval process in San Francisco, which historically took two to three years, is now streamlined, potentially reducing it to less than one year.
Similarly, developers undertaking office-to-residential conversions, like Group i, are benefiting from the city’s more accommodating development approach. The streamlined approval process has facilitated projects like converting 25,000 square feet of office space into 45 apartments. Despite some compromises, the consensus is that these changes are necessary to stimulate development in San Francisco’s housing market.