Frontier Group’s Downtown San Francisco Hotel Tower Approved

The San Francisco Planning Commission signed off on a hotel development, despite a neighboring office landlord’s opposition, as the city faces a tourism slump.

The city planning commission approved a 211-room hotel at 570 Market Street in the Financial District, the San Francisco Examiner reported. The plans from Frontier Group call for a 29-story tower rising approximately 300 feet and replacing a partially vacant two-story building on a narrow lot.

The project was first proposed in 2019, when the local lodging market was flourishing, but the pandemic ground that pace practically to a halt.

Chelsea Pacific Group, the owner of the historic seven-story Chancery Building next door to the proposed hotel, fought against the plan.

Chelsea Pacific argued that Frontier Group’s planned hotel would be so close to the Chancery Building’s side windows that it would block sunlight, decrease privacy and make it harder for the firm to find tenants for offices. It also pointed out the effects of noise, dust, air pollution and vibration caused by construction that can damage property. The building’s office space is 96 percent leased — a notable success with the city’s second-quarter office vacancy rate at 35.7 percent, according to JLL.

Chelsea Pacific submitted an economic analysis earlier this summer saying a new hotel isn’t needed and would hurt existing hotels, but Frontier Group’s analysis, completed by CBRE’s hotel advisory group, said the proposed hotel will likely enter a “strong and viable” market.

San Francisco visitor spending fell from $9.6 billion in 2019 to $2.7 billion in 2020, while the number of visitors dropped from 26.2 million to 11.8 million. Tourists have started flocking back, but tourism levels haven’t yet returned to pre-pandemic levels. Tourism is expected to rise over the next year, with 23.5 million visitors projected this year, according to San Francisco Travel Association.

Hotel occupancy is projected to reach 65.2 percent this year and 66.3 percent next year. In the year before the pandemic, the rate was at 82.7 percent.

Hotel properties in San Francisco and across the Bay Area have seen better days. Hotel owners have fallen into loan default or faced foreclosure, bankruptcy, depressed sale value and closure as the market gets back on its feet.

— Chris Malone Méndez