San Francisco’s Second Act

San Francisco, SoMa, South of Market, Transbay Tower, Salesforce Tower, John Rahaim, Central SoMa Plan, Central Subway Project, Western SoMa Plan,

SOMA takes shape

South of Market metamorphosis is just starting to take shape.

THIS ARTICLE WAS PUBLISHED IN THE ‘Q’ – THE REGISTRY’S PRINT PUBLICATION – IN JULY 2014

By Neil Gonzales

[dropcap]S[/dropcap]an Francisco’s South of Market District has gone through a dramatic transformation in recent years as the booming technology sector has swept into the area well-known for its funky mix of industrial, commercial, residential, entertainment and arts environments. Tech firms such as Twitter, Square and Airbnb have opened up offices in SoMa, helping to revitalize stretches of city blocks. Punctuating tech’s omnipresence in the district will be the 61-story Salesforce Tower at Mission and Fremont streets. Formerly named the Transbay Tower, it is slated to be the city’s tallest building upon completion in 2017 with cloud-computing giant Salesforce.com as the anchor tenant.

SoMa’s landscape is also changing because of the city’s desire to extend transit-oriented development across San Francisco to foster walkable, vibrant live-work communities and reduce greenhouse-gas emissions from passenger vehicles. The Transbay area epitomizes that effort with revamped transit center, more than 4,400 units of new housing, nearly 1,000 hotel rooms, 100,000 square feet of retail space, several million square feet of offices and 11 acres of public parks are also in store.

[quote]”The great thing about SoMa is its eclectic nature of neighborhoods. We want to make sure that is not lost. So the height increases will be in strategic locations. It’s more surgical than we would normally do it.” San Francisco Planning Director John Rahaim[/quote] [contextly_sidebar id=”wauMBNfC9vcgIwvzT7wjqlZXbPQ5frnG”]Yet for all the changes, SoMa’s real metamorphosis has hardly begun. Long-term development will likely bring an increased number of taller buildings, denser communities mixing homes and businesses, invigorated retail corridors and perhaps even a new neighborhood if part of Interstate 280 running through the district is removed.

The SoMa of recent decades has been blue-collar and culturally hip, thanks to a mix of historic Victorians, low-income apartments, warehouses, art galleries, museums and nightclubs. But SoMa could see a return to the kind of prominence that it enjoyed at around the turn of the last century. Before the 1906 earthquake, SoMa “was the pinnacle of wealth and stature,” said Hans Hansson, president of San Francisco-based Starboard TCN Worldwide Commercial Real Estate. Current and future development will once again make it “the highest priced real estate per square foot in San Francisco.” Already, residential units in SoMa are fetching $1,200 a square foot on average. “It’ll go higher,” Hansson said.

Integral to the kind of district Hansson foresees is the city’s proposed Central SoMa Plan, encompassing about 260 acres bounded by Market Street to the north, Sixth Street to the west, Second Street to the east and Townsend Street to the south. The plan ultimately would add 3,490 housing units on 4.2 million residential square feet and 27,820 jobs on 5.6 million commercial square feet to the area.

It also calls for allowing taller buildings at certain locations to spur commercial development.

“We are proposing substantial increases in height but not everywhere,” city Planning Director John Rahaim said. “The great thing about SoMa is its eclectic nature of neighborhoods. We want to make sure that is not lost. So the height increases will be in strategic locations. It’s more surgical than we would normally do it.”

The plan would allow for towers between 130 and 320 feet mostly south of Harrison Street, increasing height limits in that area by 45 to 235 feet. It would permit towers of up to 400 feet for select sites south of Harrison.

The plan also ties in with the Central Subway Project, a rapid light-rail system that will run along and under Fourth Street from the Caltrain station near AT&T Park in SoMa to Chinatown. Greater height along this corridor “serves to orient people to the location of this major transit line as well as locate higher-density uses” near mass transportation, the plan says.

Transit-oriented development “has been the Bay Area trend for the last 15 years,” said Hanson Bridgett’s M. Brett Gladstone, a San Francisco attorney with expertise on land-use and real-estate issues. “To discourage people from using cars, the city is trying to build jobs and housing along major transit lines.”

But Rahaim noted that today’s city dweller, particularly tech workers in their 20s and 30s, are not interested in driving and seek jobs and activities within walking or biking distance.

Rahaim said he hopes the city adopts the plan in about a year, with construction starting as early as 2016.

While city leaders tout the plan as striking a good balance between new growth and the preservation of SoMa’s diverse economic and social mix, not everyone embraces its methods. Community activist Jim Meko calls the plan “hogwash,” saying “it displaces a lot of existing businesses and is not respectful of what exists there already.”

In contrast, he said, the Western SoMa Plan adopted last year does a better job preserving the mix of uses that has been in the area for decades. Meko, who headed a citizens’ task force that worked on the Western SoMa Plan, said developments are building “similar in scale to what’s already there” and enhancing residential enclaves by including such elements as a back yard or an improved alleyway that’s open only to pedestrians.

While the Western and Central plans are separate, a project that envisions Folsom Street as a new shopping and dining corridor would link the two areas as well as other SoMa neighborhoods. It would convert Folsom from a busy one-way street into a two-way civic boulevard lined with retailers, restaurants and outdoor cafes. This redeveloped stretch would also encourage housing developments with ground-level retail such as the Rene Cazenave Apartments, which has already opened at the corner of Folsom and Essex streets and offers below-market rents to low-income residents.

Down the line, the city is looking at possibly removing part of Highway I-280 that lands near the Caltrain yard in SoMa. That could lead to the kind of residential and commercial rejuvenation that Hayes Valley saw after part of the Central Freeway was taken down because of damage from the 1989 Loma Prieta earthquake.

Once available lots in the Central SoMa Plan are developed, Gladstone said, “the only place that will make sense for more up-zoning for housing and jobs would be the places where 280 currently is.”

The pace of construction in SoMa will be dictated by an economy mostly driven by the tech sector, city leaders said. Indications point to strong market conditions continuing for the next two to three years at least.

“I think it’s impossible to predict what will happen over the next 20 years,” said Mike Grisso, senior project manager for San Francisco’s Office of Community Investment and Infrastructure. “That said, there’s no question that demand for office space in SoMa is very strong and appears to be growing. The tech companies want to be here because their employees want to be here. I don’t see any of that changing in the short term.”

But Markus Shayeb, senior vice president of tenant advisory in the San Francisco office of Houston-based real-estate services firm Transwestern, sees some caution signs. “Everyone else—the non-tech guys—is getting priced out of SoMa because commercial rents are now at $60 to $70 per square foot per year,” Shayeb said. “When those leases are over for the non-tech tenants, there’ll be quite a turnover.”

Shayeb also noted that tech firms are doing “incredible leasing,” but much of the space is not occupied. As a result, he suspects that these firms will likely sublease their empty space.

While the economy will eventually hit a downturn just because that’s the way market cycles work, he said, a repeat of the dot-com bubble burst of 2000 is unlikely. Today’s tech firms “have great balance sheets and strong business models,” he said. “There’s going to be a market decline, but it’s going to be gradual.”

SOMA takes shape

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