Next building boom looms over SoMa

San Francisco Business Times
J.K. Dineen, Reporter
Friday, November 16, 2012

South of Market property owners are rushing to take advantage of a plan to rezone the area around the Central Subway, submitting proposals that would add up to more than 2.5 million square feet of new infill development in San Francisco.

Responding to an invitation from the city, developers have quietly submitted new proposals in the last few weeks. They include TMG Partners, Zappettini Properties and Cresleigh Development. Tishman Speyer filed an application last summer.

The largest of the preliminary proposal applications is San Francisco-based Cresleigh Development’s 1.3 million-square-foot project on Harrison Street between Second and Third streets. The $420 million “mixed-use integrated” development, which is being designed by Skidmore Owings & Merrill, calls for a 478,000-square-foot office building, a 406,000-square-foot residential tower and a 300-room hotel along the south side of Harrison. Restaurants and retail would line the streets and the development would incorporate a small historic building at 645 Harrison. The residential tower and the hotel would have rooftop gardens.

“We think this is a desirable project for a lot of reasons,” said Denise Hannon, a senior vice president with Cresleigh. “The site itself is close to the Central Subway station and close to the Transbay entrance on Second Street. It would be the closest hotel to AT&T Park and also close to the planned Warriors arena on Piers 30-32. It would create jobs and housing and, given the size of the site, we think it’s feasible.”

Cresleigh Development is run by Lawrence Lui, who also is the president of San Francisco-based Stanford Hotels Corp., which owns 17 hotels. Lui was traveling and not available for comment.

A few blocks south on Brannan Street, developers have submitted plans to build 1.4 million square feet in three separate projects. At 501-505 Brannan St., TMG Partners is proposing a $20 million, 200,000-square-foot office building on a surface parking lot that is owned by Bank of America. Heller Manus is the architect. Amy Neches, a partner with TMG Partners, declined to comment.

Tishman Speyer has filed an application to build a 700,000-square-foot office complex on a 97,000-square-foot parcel at 598 Brannan St. The property is owned by the Hearst Corp., which has used it to store and maintainSan Francisco Chronicle delivery trucks and newspaper racks.

At 610-620 Brannan St., Zappettini Properties is seeking permission to construct a 567,000-square-foot office building on the southeastern corner of the San Francisco Flower Mart. The property is partially used as a surface parking lot, although the smaller building at 620 Brannan St. is occupied by a tenant of the wholesale flower market. The parcels together represent less than 10 percent of the Flower Mart facilities, according to John Zappettini, who heads Zappettini Properties.

“We are exploring all our options — it’s early in the Central Corridor process. We want to balance the interests of our family, the city and our immediate neighbors in parallel with the Central Corridor planning process,” said Zappettini. “I appreciate that one of the goals of the Central Corridor plan is to incentivize creative office space, so obviously that use is going to be sorted to the top.”

Obstacles ahead

The slew of proposed projects comes as the city’s planning department is nearing completion of its draft Central Corridor Plan, which planners hope will create enough new space for 30,000 new jobs in an area bordered by Second and Sixth streets on the east and west and Mission and Townsend streets on the north and south. The plan will then undergo a two-year environmental review, which is required under the California Environmental Quality Act, before the Planning Department and Board of Supervisors weigh in on it.

The Central Subway, scheduled for a 2019 opening, will extend 1.7 miles from the Fourth Street Caltrain station and will have stops in SoMa, Yerba Buena, Union Square and Chinatown. The proposed rezoning would favor technology-friendly buildings on larger parcels of available land, limiting housing to lots under 20,000 square feet.

But the plan — and the slew of projects it is spawning — threatens to run into early obstacles.

Since 1985, Prop M has limited approvals for large new office complexes to 875,000 square feet each year. Even before the TMG, Zappettini and Cresleigh applications were submitted, the San Francisco office pipeline exceeded Prop M limits. There is currently 4 million square feet of space under the cap, while currently 2 million square feet of office project applications are pending, another 2.2 million square feet of projects are in the pre-development design review stage, and 2 million square feet of projects ­— including the Central Corridor projects — have applied for preliminary project assessments, the first step in the development process.

In addition, the Brannan Street proposals highlight conflicts between two plans now under way: the Central Corridor Plan and the Western SoMa Community Plan, which seeks to protect blue collar jobs and the arts west of fourth street. As things stand, the Brannan Street parcel could be rezoned for industrial and arts uses later this year under the Western SoMa plan and then rezoned for office use under the Central Corridor plan two years later.

SoMa activist Jim Meko said the West SoMa plan prohibits office use along Brannan Street between the west side of Fourth Street and Sixth Street. “The Planning Commission is set to adopt the Western SoMa plan as written. Office is not permitted, period. The notion that the Central Corridor plan may go off in a different direction is a totally unsettled issue. The planners are going through a fantasy if they think they can put in all this tech office, protect light industrial jobs and have nightclubs and housing. It’s a real song-and-dance routine.”

Space for jobs

Planning Director John Rahaim said the department didn’t set a hard and fast deadline for preliminary project applications. But planners made it clear that the department aimed to set “the range of alternatives by the middle of the fall.” He said the proposals “are all a little higher density than what we had talked about, but that’s OK. We told them we wanted to finalize the alternatives so they are trying to get their ideas out on the table so we can consider them,” said Rahaim.

While property owners seem to be pushing for maximum density, not uncommon during the early stages of an entitlement process, most of the proposals coming in are in line with the principles of the Central Corridor plan, the planning director said. “The focus is on commercial office space, on space for jobs, which is the intent of the Central Corridor plan,” said Rahaim.

Developers have been circling the Flower Mart site for decades, though redevelopment has always been complicated by the fact that the marketplace has dozens of owners and tenants who would need to be relocated should the site be developed. Zappettini said Flower Mart owners and tenants “continue to evaluate all options for the future as their businesses and markets evolve.” He stressed that his parcel could be redeveloped without adversely impacting the overall flower market operation.

“We are very proud of our family heritage in the flower business and our contributions to the flower market for the past three generations. We hope to continue to be a strong supporter and advocate for what is best for everyone there,” he said.

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