Crescent Heights Proceeds With San Francisco Residential

Crescent Heights is moving closer toward making its planned 67-story residential tower in downtown San Francisco.

The Miami-based developer is in motion on its planned $1 billion project at 10 South Van Ness Avenue as it consults with construction, design and engineering teams on a path forward, the San Francisco Business Times reported. The 1,000-unit tower could begin construction by early 2027, opening for occupancy amid what’s expected to be a hot market for residences as the number of artificial intelligence jobs continues to grow in the city.

The progress on the project marks a thawing in the high-rise construction pipeline that has largely been frozen due to pricey construction and costly debt. If Crescent Heights makes it happen, it could be the first major developer to build a high-rise residential tower in San Francisco’s recent supply-restricted market.

Rising rents in San Francisco could explain why the project is inching closer to actually being built. Rents in the city increased 4.6 percent year-over-over, representing the third-fastest jump in the country, per Apartment List data cited by the Business Times. As a result, financial models have also improved, thanks in part to increased investor confidence, construction costs decreasing between 5 and 10 percent from their peak, and an easing on borrowing costs. Case in point: Equity Residential recently told its investors that the recovery of downtown San Francisco is picking up steam as workers return, occupancies increase and rents approach pre-pandemic levels.

As it stands, investor-driven lenders make up 30 percent of construction loans, while regional banks have fallen to 25 percent. Office and apartment starts are still notably down from a year ago, signaling that capital isn’t quite ready to dive head-first back into the market.

Still, other developers are also charging ahead with their plans for downtown San Francisco. Lincoln Property Company, for example, is moving forward with its proposal for about 370 residential units as part of a mixed-use redevelopment located on the campus of Golden Gate University.

Local officials are hoping to help speed up the process. On Tuesday, city supervisors approved a rezoning plan that increases housing capacity by 36,200 units. Officials also recently waived impact fees in the city’s Hub and Market-Octavia districts, which is where Crescent Heights’ tower would be built. Moves like these should, in theory, lower upfront costs so approved projects can actually get started.

“We are doing all of this work to be better able to deliver what our public needs,” Leigh Lutenski, the director of development for the city’s Office of Economic and Workforce Development, said.

— Chris Malone Méndez