The challenges San Francisco faces converting office space into residential units

The "how," the "why" and the "when" on conversions in San Francisco

Lyanne Melendez Image
Wednesday, November 8, 2023
The challenges SF faces converting office space into residential units
San Francisco faces a number of challenges when looking at converting empty downtown office space into much-needed housing.

SAN FRANCISCO (KGO) -- As San Francisco continues to have the weakest recovery from the pandemic of any major US city, 34 percent of downtown office space is now empty. At the same time, there's not enough housing in the city. Could some of that empty office space be turned into much-needed housing?

San Francisco is in a constant battle with itself: Too much commercial space but not enough housing.

"It does cost less, in many examples, to convert one of these buildings than to build fresh," said Marc Babsin, principal of Emerald Fund, a San Francisco-based real estate development company.

That's what Mayor London Breed wants to hear.

Like a marriage, she believes "the coming together" of the two may help to revitalize downtown.

"We will continue to adapt, we will adjust and we will be better," Breed has insisted.

The operative word is "conversions." It's been done before.

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In 2006, the Royal Insurance Building at Sansome and Pine Streets across from the old Pacific Stock Exchange was converted from office space to 46 condos.

The Ritz-Carlton building on Market Street with 52 units was once the site of the San Francisco Chronicle.

And in the 1930s, A.P. Giannini, had a branch of the Bank of Italy. It later became the Bank of America, which lent Walt Disney the money to complete his first feature film, "Snow White," and later, other projects.

That building, One Powell Street was converted into 44 high-end lofts in 2004.

We know it's possible but what does it take to convert a commercial space into residential units? The answer: it's not that simple.

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Strachan Forgan knows a thing or two about conversions.

His firm, Solomon Cordwell Buenz was behind the largest office-to-residential conversion in San Francisco's history, 100 Van Ness, a 29-story building that now has 418 rental units.

100 Van Ness was the old AAA building.

100 Van Ness, what used to be the AAA building converted into residential units.
100 Van Ness, what used to be the AAA building converted into residential units.

"The biggest thing we did with the building was to remove the old precast concrete facade and to replace them with floor-to-ceiling glass to really allow the view potential in the building to be realized," outlined Forgan.

Inside, for many conversion projects, one of the biggest challenges is the plumbing.

"So that means we have to cut new vertical risers throughout the building," explained Forgan.

Which means drilling holes through the concrete.

Each unit must now have its own plumbing, sprinkler heads, thermostat, heating and ventilation, and lighting.

"Light and air and natural light into the units is a big deal," said Joseph Camajani of engineering consulting company IMEG. "Many of these office footprints are very large and deep and it's difficult to get natural light into the bedroom units."

For IMEG, a floor-to-ceiling glass exterior was ideal.

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One tenant says there's an ongoing rat and roach problem, the ceiling leaks, and she doesn't have hot water but advocates believe the lawsuit from the City Attorney will be a game changer.

ABC7 asked at what point do you decide to knock the building down and build from the ground up?

"I think there are some buildings that have reached the end of their useful life and the highest and best use of that land might be to build new construction," said Forgan.

He's now looking at 15 possible conversions in San Francisco, but only three to five are potential candidates.

The other challenge is dealing with the Planning Department.

Because the city really wanted 100 Van Ness to succeed, the permits were expedited.

The property was purchased in 2011 and only four years later was ready for occupancy.

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There are other conversions that have been enormously profitable as well, like at 2121 Webster Street in Pacific Heights, the old University of the Pacific Dentistry School.

It went on the market in 2016 and the sale of the 76 condos is said to have generated $300 million.

But that was then. Today in 2023, conversions may be less profitable.

"Construction costs have probably doubled what they were and rents right now, rents have dropped so much that they're not much above from what they were in 2012," revealed Babsin.

Also, when 100 Van Ness was being built, the city required the owners to set aside 13 percent of the units for affordable housing, today it's 21%

Any developer, architect, or engineer will tell you that City Hall will need to provide more incentives to make these conversions more realistic.

"We've got this huge inventory of buildings that could be good enough and could be useful to people who need them," said Camajani.

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