Central SoMa Redevelopment a Waiting Game as City Planning is Delayed

Central SoMa, Tishman Speyer, TMG Partners, Boston Properties, Kilroy Realty Corp., Office, Multifamily, Flower Mart, San Francisco

soma eventBy Dan Smith

Representatives of four firms expected to ignite San Francisco’s next hotspot for development gathered last month to talk about taking advantage of loosened height and density restrictions in the city’s new Central SOMA plan, while still preserving the area’s eclecticism.

“We really want it to stay as eclectic as it is,” said Carl Shannon of Tishman Speyer, which has two of the eight main parcels with proposed developments in the Central SOMA neighborhood. Bordered by Market, 2nd, Townsend and 6th streets, the area was the subject of a morning conference Jan. 28 at the Julia Morgan Ballroom in San Francisco, hosted by The Registry and attended by some 300 industry professionals. As Shannon added later, “This is very different than downtown. There’s different architecture, different materials, different blocks.”

[contextly_sidebar id=”g0wHXE6J6C5WoDS3F1zgEP4IbRtqWMfj”]City Planning Director John Rahaim kicked off the conference, speaking about progress on the city’s two-year-old draft plan. Rahaim said environmental review and the proposed rezoning won’t be complete until late 2016 or early 2017. The plan calls for $2 billion dollars in “public benefits,” funded through impact fees and a Mello-Roos district. These include a 33 percent affordable housing ratio and a recreation center and playground on parts of four acres of public open space.

Some of the developers expressed concern that the cost of such benefits could hurt the viability of the projects, particularly if the economy dips.

“Clearly there’s a tipping point somewhere in the economics,” said Matt Field of TMG Partners, which is planning 135,000 square feet of office space to replace the Bank of America building at 505 Brannan Street. “Affordable housing is worth less than it costs to produce.”

Shannon expressed concern about public benefit levels “set at the top of the cycle” noting, “It’s really ultimately paid for by the users.”

Naturally, a major topic of discussion was Proposition M, the 1985 cap on new office space which Rahaim said will likely not be modified by ballot measure before 2018, if ever.

“Land use planning by ballot is not a good way to go,” commented Michael Tymoff of Boston Properties, which is planning a million square feet of office and mixed-use development on 2.3 acres at 4th and Harrison streets.

Shannon and Field both mourned a lack of clarity in the city’s timeline, with Field later speaking of “a risk premium” and admitting, “I worry about the perceived uncertainty.”

One thing the panel was certain about is the importance to the neighborhood of the Flower Mart, a 90-year-old San Francisco business located at 5th and Brannan currently and for most of those years.

“I think having the Flower Mart stay in the area is a huge plus for all of us,” said Shannon, relating the Mart to the desire to “keep the eclectic nature of what SOMA is.”

“It’s a very important institution for the city and the community,” agreed Mike Sanford of Kilroy Realty Co., the publicly traded real estate investment trust that bought the Mart’s two-acre site for $2.7 million in 2014. Sanford said Kilroy envisions an enclave “like the Boqueria in Barcelona or Chelsea Market in New York,” concluding of the city’s plan, “We’re all incentivized to do right.”

West Coast Commercial Real Estate News