San Francisco voters recently approved a ballot measure to offer tax breaks to developers who convert commercial buildings to residential use.
The tax break applies to conversions of up to 5 million sf of commercial space through 2030. San Francisco’s office vacancy rate hit a record 36% in December, and it is expected to increase this year.
The initiative is intended to help transform the city’s downtown from a 9-to-5 business district to a 24-hour mixed-use neighborhood. San Francisco’s downtown has a higher-than-average stock of commercial buildings that are suitable for residential conversions. According to a report by Gensler, 40% of the city’s downtown buildings evaluated would be suitable for conversion. That compares to about 20% of buildings in a typical U.S. city.
San Francisco’s stringent planning standards and its building codes, as well as high construction costs, make office-to-residential conversions a heavy lift, though.
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