By Meghan Hall
In May of 2018, the San Francisco Planning Commission adopted the Central SoMa Plan, designed to encourage the development of 16 million square feet of housing, a third of which would be specifically designated as affordable. In exchange, developers would receive the opportunity to build denser projects. After receiving entitlements for commercial development, oWOW is looking to capitalize on the Central SoMa Plan by proposing housing above its already approved office space at 960 Howard.
Previously, oWOW had been working to construct three stories and 25,000 square feet of creative office space at the project site. The offices would be constructed as part of the rehabilitation and conversion of an existing warehouse in which the original building envelope would be maintained. The ground level office space will feature a courtyard and break area with a living wall backdrop, as well as small group breakout areas and desk pods.
However, oWOW is planning to add to its proposal. Under the Central SoMa Plan, project applicants can receive perks–including fast tracked entitlements–if they include high-density housing and affordable units within their development. As a result, oWOW filed updated plans with the City at the beginning of October. The plans indicate oWOW intends to construct ten stories–or about 130 units–of residential above the proposed office space. 24 units will be priced as affordable; 10 units will be one-bedrooms and the remaining 110 units will be two-bedrooms.
In all, the 106,870 square foot building will have 16,600 square feet of offices, 940 square feet of ground floor retail, 92,430 square feet of residential and 5,180 square feet allocated towards light industrial uses.
“With the Central SoMa Plan, this neighborhood is now becoming a great location to build and develop in,” explained oWOW’s CEO Danny Haber. “Central SoMa zoning made this location an interesting one from a feasibility standpoint.”
oWOW was also attracted to the location, Haber noted, because of the incoming BART line and the large pipeline of development slated to take place in the area over the next couple of years, adding to the neighborhood’s economic vitality. Projects like Brookfield’s 5M, which will include more than 850 residential units and 640,000 square feet of space, or 921 Howard, an 18-story, 100 percent affordable housing project, for example, are expected to bring a new dynamism to South of Market.
“You don’t have to be a rocket scientist for that one,” said Haber.
oWOW’s 960 Howard will be built using prefabricated panels as well as mass timber in an effort to reduce project costs. Project documents state that the residential portion of the project will be “architecturally distinct” from its commercial counterpart.
“While phase 1 is reverent to the SoMA’s rich history of light manufacturing and commercial spaces by incorporating the original facade, phase 2 looks to the future by adapting to current housing needs. Together, they contribute to the ever-evolving economic and cultural vitality of the region,” plans state.
Project documents state that the cost of construction is in the realm of about $20 million.
The future of SoMA, however, will depend largely on its recovery from COVID-19. According to Haber, factors such as hybrid work models, employee confidence in safety protocols, and the rate of development will play a role.
“There is a huge amount of development..I think if San Francisco returns to what it was pre-COVID in terms of the office market, Central SoMa will become very similar to downtown,” said Haber. “[The neighborhood] will be less warehouses and body shops. People aren’t using those spaces for warehouses and body shops–they’re using them for creative tech office.”
At the end of the third quarter, many firms in San Francisco were continuing to “rebalance” their office footprints within the city, according to a recent report released by Kidder Mathews. As companies continue to give up space, vacancy climbed once again from 18.6 percent to 18.9 percent over the past few months. Sublease vacancy did decrease, however, as demand for well-priced, plug-and-play assets continued. Subleasing accounted for about 46 percent of total leasing during the third quarter.
Direct lease rates do continue to decline. Overall, Kidder Mathews notes that rents have fallen 15 percent since the first quarter of 2020. On a more positive note, leasing activity has exceeded last year’s total with 4.2 million in deals inked–a sign of life that many in the commercial real estate industry are holding onto as the market works to recover.