If you watch national TV news — or eavesdrop at your local coffee shop — you may have heard something like this: San Francisco’s offices are lying vacant, homelessness is rampant, and the city is floundering.
Bay Curious listener Judith Gottlieb, a retired nurse in Oakland, has been hearing some of those stories. And the idea of people sleeping on the street breaks her heart. One day, she got an idea.
“I heard about all these empty office buildings in San Francisco, and I was thinking, couldn’t we just move [people] in there really quickly?” Gottlieb asked Bay Curious.
Office vacancy is hovering around 30% in downtown San Francisco, and recently there’s been a lot of talk about converting all these empty offices to living space as a way to create much-needed housing and revive downtown at the same time.
“The unhoused need dignity. They need a roof over their head,” said Gottlieb. “Anything we can do is better than just waiting around.”
Bay Curious looked into the economics of converting office space to housing in the city, and explored whether this is a good option for getting people off the streets.
How difficult is conversion?
Offices have been converted to housing before in San Francisco, but only a handful of times, according to the San Francisco Planning Commission. But as far as the agency knows, it hasn’t been done for people experiencing homelessness.
A prime example of a market-rate conversion is 100 Van Ness, a 28-story, glass-covered tower just steps from Market Street and City Hall.
This tower first belonged to the California State Automobile Association and was built in the 1970s. Back then, it was a beige tower of concrete with small rectangular windows. Now its exterior is almost all glass.
“We essentially took off the entire façade of the building and replaced it with this floor-to-ceiling glass,” said Strachan Forgan, a principal at SCB, the architectural firm that helped create the residential units in 2015.
During a recent tour of 100 Van Ness, Forgan explained the complete transformation of the interior of the building. The once sprawling open floors of office space have been carved up into hundreds of luxury apartments. Only four of the original eight elevators remain, because residential settings have less need for elevators, according to Forgan.
The converted apartments — ranging from $3,159 for a tiny studio to more than $6,000 for a roomy two-bedroom — are not without design quirks. Some are attractive, others less so.
Things residents may enjoy are the elevated ceilings — slightly higher than in your standard apartment. Developers also removed the heating and cooling machinery, which is typically kept on office building roofs, to make open leisure space instead, complete with chairs and 360-degree views of the Bay Area.
“It has pretty spectacular views in every direction,” said Forgan, with a backdrop of the Marin Headlands, and the many hills of San Francisco, behind him.
On the downside, some apartments at Van Ness have fewer surface area for windows, so bedrooms use “borrowed light” from living spaces. Because the apartments are carved out of a vast open office floor, many of the apartments are long and deep, stretching from the window to the center elevators.
As a result, many apartments at 100 Van Ness have long, tunnel-like hallways with windows at the end. In one of the building’s one-bedroom units, a windowless bedroom in the middle of the layout has a semi-transparent wall to let in light from the living room.
When 100 Van Ness first opened to residents, units with windowless bedrooms were initially offered with significant discounts, but developers soon found that wasn’t necessary.
“Actually, the residents really like it because it’s very quiet,” said Forgan. “You’re away from the hustle and bustle. It can be a little darker, so if you’re sleeping there, it’s fine.”
It comes down to money
Forgan’s firm wants to stay in this business of designing conversions of offices to housing. They see the value to downtown San Francisco, and the environment. Reusing an existing building has a smaller carbon footprint than knocking it down and starting from scratch.
So why is this project one of only a handful of office-to-residential conversions in San Francisco?
Perhaps not surprisingly, it has largely to do with the high cost of housing development.
On a very basic level, there’s the cost of new plumbing and electrical. You need pipes for new kitchens and bathrooms. Then, a lot of these buildings need a seismic upgrade. Forgan says the kind of housing that would recoup costs of a conversion would be at the higher end of the market.
“You’ve got to buy the building and do everything to convert it. And by the time you add up those costs, the only thing that pencils [out] is more of a luxury product, especially with a building like this that has great views and a good location,” he said.
Housing developers like the Emerald Fund, which backed 100 Van Ness, say they’re interested in doing more office-to-housing conversions. The raw construction costs of converting offices could actually be done more cheaply than building a brand-new apartment tower, says Marc Babsin, president of the fund.
Babsin says they’ve looked at four office buildings to convert recently, but so far, no new project has made sense cost-wise.
“We continue to look. We think this is a great idea from a public policy perspective. We do need to save our downtowns and this is a great way to do that, to bring people onto the street,” said Babsin. “It’s a great way to produce housing that is currently not being produced.”
Public policy experts at the San Francisco Bay Area Planning and Urban Research Association (SPUR) agree that the hefty costs of development can make such a project a nonstarter.
Sujata Srivastava, San Francisco director at SPUR, explained a few of the financial burdens that give housing developers pause:
- City fees that support public projects like child care programs and transportation, which can add up to millions of dollars.
- Transfer and property taxes.
- Reduced revenue potential, because San Francisco requires a certain number of units be affordable to lower-income tenants.
- Construction costs, which are very expensive right now.
“It doesn’t really make any financial sense to do conversions under the current costs that we have in San Francisco,” said Srivastava, adding that housing development is even less likely because rents are also down since before the pandemic. “The math just doesn’t really work.”
A recent SPUR report suggests city lawmakers need to make major changes if they want to jump-start these conversions.