San Francisco Could Pull Prop M Office Allocations

San Francisco is telling office developers to either start building or step aside.

City Hall is preparing to revoke valuable Proposition M office allocations from developers sitting on long-stalled commercial projects in a move that could reshuffle the pipeline for millions of square feet of future office development, the San Francisco Chronicle reported.

This would be done by activating a rarely used enforcement tool under Prop M, a 1986 voter-approved growth control measure that caps the amount of office space that the city can approve each year.

San Francisco Planning Department Director Sarah Dennis Phillips outlined the policy change in a memo to the Planning Commission last week. Under the changes, projects that have made little or no progress toward development could lose their office allocations immediately, while developers that have proposed community benefits but haven’t pulled building permits would have up to 18 months to do so before risking forfeiture of their Prop M office allocations.

The move is part of Mayor Daniel Lurie’s push to accelerate downtown’s recovery while preventing developers from indefinitely holding on to office entitlements.

The policy would largely affect Central South of Market, where several developers have sought to swap once-envisioned office megaprojects for thousands of residential units but have continued holding on to the Prop M allocations that would allow them to revive office plans if market conditions improve. City officials have grown frustrated with what sources described as a strategy of keeping “one foot in, one foot out,” particularly as new office proposals emerge elsewhere in the city.

The timing matters because the Prop M pipeline has tightened dramatically. Prop E, approved in 2020, tied annual office allocations to the city’s affordable housing production. With San Francisco falling short of state housing goals, less than 100,000 square feet of new office allocation was added last year, and Phillips expects only 100,000 to 200,000 square feet to be added annually in the near future.

That leaves new entrants competing for scarce development rights. Hines’ proposed redevelopment of the former PG&E block at 77 Beale Street and Lincoln Property Company’s planned overhaul of the Golden Gate University campus at 536 Mission Street are among the major Financial District proposals still seeking allocations, together representing nearly 2 million square feet of potential office space.

“When Mayor Lurie took office, inheriting a hollowed out downtown, he set out to foster a safe, clean neighborhood where people actually wanted to spend time,” Lurie spokesperson Charles Lutvak said in a statement to the Chronicle. “Now that people want to spend time and invest in downtown, we can build offices that bring workers downtown — creating jobs, supporting local businesses and generating revenue that funds services all San Franciscans rely on.”

— Chris Malone Méndez