Could Empty Offices in San Francisco Be Converted to Homes?

Read a transcript of this episode. 

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.

San Francisco politicians have already made some changes, and are working on more. The Mayor’s Office and supervisors have relaxed rules about open space, sunlight and apartment sizes for some conversions. Elected city officials have proposed reducing affordable housing requirements and impact fees on all new housing developments, but not as low as developers want.

It’s all part of the city’s effort to jump-start more activity downtown and build more housing.

A solution for homelessness?

Since the pandemic emptied out office space in the Financial District, downtown streets look vacant; pedestrians experience windy sidewalks, empty restaurants and sparse foot traffic. Graham Luth was sitting on the sidewalk on 2nd Street near Montgomery Street one recent Friday morning, trying to get money to go to Colorado.

“I got evicted, sort of,” said Luth about being temporarily without a home. “I got a job offer but I’m short on bus money.”

When asked about this idea of sheltering people in empty office space downtown, Luth looked up at the tall buildings around him, and said, if no one’s using them, why not?

“I think it’s a fantastic idea because there is a lot of space that is just … sitting there,” said Luth. “So I guess just being able to figure out who owns the spaces and if … they’re not gaining or losing, that the space can be used for a matter that would help support the whole community.”

However, the city of San Francisco may have already found a different way to shelter people without housing: buying underused hotels.

“One of the things that happened during the pandemic that … really kind of changed the landscape around solving homelessness was this idea of using hotels,” said Jennifer Friedenbach, executive director of the Coalition on Homelessness.

During the pandemic, San Francisco and their partner organizations bought eight hotels and apartment buildings to provide permanent supportive housing to people who were formerly on the streets. It has created almost 1,000 new housing units for people without shelter. The city is in the process of acquiring two more buildings.

As a result of San Francisco’s efforts, the unsheltered unhoused population has gone down 15% since 2020. That’s as homelessness in general has gone up around the state, according to the Public Policy Institute of California.

“Folks are getting housed,” said Friedenbach. “That has been really incredible.”

San Francisco used state COVID-19 money through Project Homekey and a local tax on large corporations, known to San Francisco voters as Proposition C, to purchase and operate the buildings.

“We had unprecedented success during COVID,” said Shireen McSpadden, executive director of San Francisco’s Department of Homelessness and Supportive Housing, about their recent efforts to house unsheltered people.

The success is due to the enormous resources that were made available to them through Project Homekey and local tax dollars, said McSpadden.

“It really showed what can happen when you can marshal resources,” she said.

Friedenbach says making housing out of hotel rooms is easier and cheaper because it already has living space infrastructure.

“A lot of the tourist hotels have larger rooms. You can turn them into studio apartments and have small kitchens,” Friedenbach said. “There’s all these design things you can do that are really cool and you’ve already got the pipes, the electricity, the water.”

With nationally owned hotels like the Hilton and Parc 55 abandoning their Union Square buildings, and the city’s recent track record of housing people in hotels, repurposing these newly abandoned buildings doesn’t seem like a wild idea.

As for Judith Gottlieb’s question, it seems that vacant hotels may be a better option for housing unsheltered people. But those vacant offices in the city’s core could one day be high-end housing, especially if lawmakers take more steps to make conversions cheaper.