South San Francisco City Council Reluctantly Approves 480-Unit Development

124 Airport, 100 Produce, South San Francisco, PS Business Parks, Hanover Company, TCA Architects
Courtesy of TCA Architects

By Meghan Hall

A South San Francisco housing project several years in the making has cleared a major hurdle, but not before facing a critical City Council. At the end of last month, the City Council voted 4-1 to approve a 480-unit project by PS Business Parks and Hanover Company at 124 Airport Blvd and 100 Produce Ave. However, the City Council debated the project heatedly over multiple meetings and attempted to ask the developer to make further revisions to the project, highlighting the difficulties of developing in the San Francisco Bay Area.

The development was first pitched in 2017 but is now just reaching the final stages of the entitlements process. According to City staff, at the time the development application was submitted, the property was zoned only for industrial uses, rather than residential. Since then, the project team has been working and waiting as the City updated its General Plan and zoning regulations.

“The applicant was quite patient in waiting for the Council to consider what we call a ‘preferred land use scenario,” said Tony Rozzi, Chief Planner for South San Francisco, at the time of the City Council’s first meeting at the beginning of November.

PS Business Parks has owned the property continuously since the 1990s, according to public records. The 4.12-acre project site is currently developed with six light industrial buildings totaling 94,000 square feet. The buildings were originally built in the 1980s, and despite their age and limited uses, they are 96 percent occupied. The development team noted during its presentation that while it is pursuing a repositioning of the site, current tenants still bring in “significant” net operating income. 

PS Business Parks and Hanover, along with TCA Architects, are hoping that the new project will bring the site into more alignment with South San Francisco’s draft General Plan and future vision for the neighborhood. Proponents of the project hope that the development, because of its significant size and location near transit, will begin to encourage other residential development in the neighborhood. 

“What’s before you tonight is not just this project or just this proposal. This could be the first housing domino to fall to convert this entire area into a vibrant, mixed-use, residential neighborhood,” said Scott Youdall, development partner at Hanover. “We’re excited to be the first project to get going…following the guidance of the General Plan.”

The project is broken into two parts, as a freeway entrance runs through the middle of the site. On the larger, 2.56-acre portion of the site at 124 Airport Blvd., the project team plans to build 294 units. Of those, there would be 61 studios, 139 one-bedrooms, 89 two-bedrooms and five three-bedrooms. Building Two, located at 100 Produce, will sit on 1.56 acres and include 186 units. Building two will have 36 studios, 90 one-bedrooms, 51 two-bedrooms and nine three-bedrooms. 15 percent of the entire project will be set aside for affordable housing.

A number of community amenities will be included in the project, including a pool, outdoor dining, courtyards, a dog wash and walking area, Uber and Lyft lounges, and bike parking.

“”We take our amenity areas very seriously,” noted Zach Anderson, also of Hanover Company. “We pay very close attention to the design, the detail, and the quality of the amenity spaces.” 

The buildings will be clad in stone on the lower level lining the lobby areas, as well as plaster panels, glass retail frontages and full-height glass at the corner units. The project is also targeting LEED Silver certification. 

However, despite receiving unanimous approval from the Planning Commission, the City Council saw the project quite differently. Council members asked the project team to consider making the project all-electric to be more environmentally friendly. They also asked the project  team to use all-union labor, especially after hearing public comment. Another Council Member asked the project team to consider getting rid of the project’s entire two levels of provided parking–a move that would require a complete redesign and re-engineering of the project’s design, noted City Staff, and would result in a reduction of units. Staff and the project team stated in their remarks to the Council that parking was included in the project per requirements and in order to increase the feasibility of renting units.

Representatives of Hanover Development also noted that the use of all-union labor would add up to $20 million to its project costs. The firm noted, however, it was willing to follow City Council requests to hire all local workers.

The Council’s debate spanned the course of many hours, culminating in a second meeting in December. At the meeting, the Council continued to ask the development team to continue considering their requests, and heavily weighed deferring its decision once again or refusing to approve the project all-together. 

After nearly four years, the project team expressed that they had worked hard to meet officials’ requirements and City guidelines, including increasing allotments for affordable housing, meeting environmental requirements, and working to complete a community benefits package.

“I express grave concern about the effort to finalize the community benefits package and the proforma that justifies this project goes forward. It is a great risk to PS Business Parks,” stressed Youdall. “…There is not a lot of incentive…and there’s definitely less incentive than there was in 2017, to explore housing projects. Ultimately, [PS Business Parks is] a public REIT, and they have fiduciary duties.”

Youdall added, “The effort to get to this stage required a lot of back and forth. I personally am concerned about the impacts of adding cost to the project or adding delay to the project. Because that is what causes projects to die on the vine.”

City staff noted that it was late in the game to be requesting such changes and reminded the Council that all of the “easy” development sites were gone.

Council members were far from receptive to these marks, with one commenting that the development team “put them in a corner” after a PS Business Parks representative stated that the firm would be  “more than happy” to leave the property as is and operable as a commercial asset for the “foreseeable future.”

“Let this be a clear notice to any developer coming into South San Francisco: Have these conversations, for cryin’ out loud,” said Councilmember Eddie Flores, who emphasized that the issues highlighted by the Council should not have only been brought up by the developer, but also other City staff along the way.

The City Council ultimately voted 4-1 to approve the project, acknowledging despite its objections that approval was better than the potential of no redevelopment at all. Vice Mayor Mark Nagales noted that long-term housing at the site was much more in line with the City’s vision than life sciences or biotech. 

However, Councilmember James Coleman–the sole dissenting vote–made a much stronger statement after the final vote: “I also want to say to other developers who come to our community, that if they try this stuff again, waiting until the very last moment to have these conversations, I hope my colleagues will join me in standing our ground and demanding what’s right for our community.”

West Coast Commercial Real Estate News