Still Waiting for the Big Bounce

Recovery Remains Slow for San Francisco and the Peninsula

Even so, the value of construction activity in San Francisco was $390 million through the first nine months of 2004, compared to $282 million in 2003, according to the Construction Industry Research Board.

By Thomas York

Webcor Builders has a March completion scheduled for Hotel Vitale, a $48 million, 141,000-sq.-ft. inn on the Embarcadero in San Francisco (photo by Thomas York).

San Francisco and the Peninsula continue to struggle through a commercial building slump, but the region is "getting back to normal" in terms of construction activity, according to a recent report by a leading construction industry think-tank.

Ben Bartolotto, director of the Burbank-based Construction Industry Research Board, reported that the value of construction activity in San Francisco was $390 million through the first nine months of 2004, compared to $282 million in 2003.

"It's nothing really exciting," Bartolotto added.

Nevertheless, local experts believe the outlook could brighten in a hurry if the economy improves this year.

Jeffrey Heller, president of Heller-Manus Architects in San Francisco, a designer of downtown commercial and residential projects, said he's optimistic that the commercial vacancy rate will drop.

He said that tenants in San Francisco were leasing space at the rate of 100,000 sq. ft. a month in 2004, and expects that pace to accelerate this year, increasing the likelihood of new construction starts.

"I expect the (commercial office) market to rise pretty fast this year, and there is going to be a strong need for new construction," he added.

Heller said his firm has two clients with commercial high-rise projects ready to bid-at 555 Mission St. and 350 Bush St.-once financing is in place.

Heller-Manus' two projects are among 30 commercial office buildings in the city that are on the drawing boards.

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Meanwhile, one of the largest building projects under way in the city is the $400 million International Cruise and Bryant Street Pier Project, a mixed-used endeavor featuring cruise ship handling facilities at Piers 30-32, under the San Francisco-Oakland Bay Bridge.

The local office of Bovis Lend Lease is the general contractor and is currently building a $86 million, 22-story residential tower that is part of the complex. Construction for the entire project, which got under way in March, should be finished by mid-2009.

Webcor Builders is the general contractor for a $150-million, 300-unit, five-story condominium project underway at 555 Fourth Street in San Francisco's South of Market Neighborhood. The owner and developer is Joe Cassidy Construction, which specializes in building condominium and retail projects throughout San Francisco.

On the grounds of the historic Presidio military base, which is now part of the Golden Gate National Recreation Area, Webcor Builders is moving ahead with construction of the 900,000-sq.-ft., $300 million Letterman Digital Arts Center for Lucasfilm Ltd., the Marin County-based movie studio famous for its Star Wars movies. Construction is scheduled to be completed in the middle of the year.

Webcor also is the general contractor for the $170 million, 740,000-sq.-ft. St. Regis Museum Tower hotel and condominium high-rise nearing completion at Third and Mission streets and the $48 million, 141,000-sq.-ft. Hotel Vitale on the Embarcadero.

Major Mixed-Use Development on the Way

The San Francisco office of Bovis Lend Lease is the general contractor for an $86 million, 22-story residential tower that is part of the Bryant Street Pier Project (photo by Thomas York).

On the southeast end of the city, the San Francisco office of Lennar/BVHP recently announced that demolition activities should begin in March on the long-anticipated redevelopment of the Hunters Point Naval Shipyard. Demolition of a number of abandoned military buildings will proceed the transformation of the 500-acre site to civilian uses.

Larry Florin, vice president for urban development, said Lennar/BVHP would eventually build 1,600 town homes and 300,000 sq. ft. of retail and office space. He also said 30 percent of the contracts would be set aside for minority and women contractors under an agreement reached with City Hall.

"We're going to build a complete new neighborhood out there -it's been a long time coming," said Florin, who added that the developer has been in the planning stages since winning the development rights in 1999 from the City of San Francisco and the U.S. Navy.

Construction continues on several high-profile projects within the city, including the $410 million San Francisco Centre, which will feature a new 338,000-sq.-ft. Bloomingdale's department store when completed in September 2006; and the $150 million, 600,000-sq.-ft. Federal Building, which will house 1,600 employees when completed at the end of the year.

At UC San Francisco's new 43-acre Mission Bay campus, general contractor Hensel Phelps Construction of San Jose is scheduled to complete the $85 million, 150,000-sq.-ft. campus community center early this year, and San Francisco-based Swinerton Builders is on track to finish a $113-million student housing complex by mid-summer.

San Francisco-based Plant Construction Co. continues its work on the $65 million reconstruction of the eight-story Olympic City Club headquarters, which will be finished in mid-2006.

Plant recently completed construction of an underground garage on Mission Street near the Museum of Modern Art and Yerba Buena Center. It will serve as the podium for the Contemporary Jewish and Mexican-American museum projects (See the following story on San Francisco's new fine arts buildings).

Peninsula Permits on the Rise

On the Peninsula, the value of new commercial construction permits issued in San Mateo County increased to $240 million through the first nine months of 2004, compared to $173 million in 2003.

Though the value rose, it remains below the $379 million in permits issued for the same time period in 2002, Bartolotto said.

Many of the permits were issued for tenant improvements not new construction, Bartolotto added. "The numbers are so low that anything that shows up would be an improvement."

Even so, there are a few bright spots.

DavisReed Construction, a San Diego-based general contractor, is well into one of the biggest projects on the Peninsula-construction of a new Four Seasons Hotel within East Palo Alto's 465,000-sq.-ft. University Circle project. The hotel is the last commercial project to be built on the site, which borders Highway 101 and University Avenue. It is scheduled to be finished in May.

In Palo Alto, Stanford University is preparing to build a controversial 600-bed dormitory for graduate students and their families. The project, estimated to cost between $100 million and $120 million, will feature three four- or five-story buildings and would include a 750-space parking structure. The project has come under fire for its size and height, and may change before the university is expected to award a construction contract this year.

On the residential side, activity in San Francisco remains a hot spot in an otherwise relatively cold construction market, Bartolotto said. Through the first nine months of 2004, the value of residential building permits totaled $249 million compared to $160 million in 2003.

Still, the numbers represent less than half the 2,716 new units needed each year to meet the demand for housing, according to a report issued by the Association of Bay Area Governments.

San Francisco-based Nibbi Bros. is the general contractor for Plaza Apartments, a nine-story, low-income housing development in the South of Market neighborhood. The owner is Public Development Initiatives Corp., a non-profit unit of the city's Redevelopment Agency.

The $16 million housing development -to be completed in the fall-will have 106 efficiency studios on nine floors. Leddy Maytum Stacey Architects and Paulett Taggart Architects are the designers.

Architect Heller said that high-density residential construction, which boomed in the first four years of the new decade, could drive the construction industry well into this decade because of soaring demand. Many projects are on the drawing boards or before the city for approval, he said.

"The demand for residential high-rise remains high-the supply cannot meet demand," Heller said. "In fact, we've never been able to meet demand in the past, and we're not doing it now."