Loss of PDR Space Appears to Continue Despite Planning Efforts

Last week, the Planning Department presented to the Planning Commission its required Eastern Neighborhoods Monitoring Reports for the years 2006-2010. In receiving the Reports the Commission discussed several issues, the most significant of which was something many San Francisco land use practitioners have become increasingly aware of, that establishing businesses and creating jobs in the Production, Distribution and Repair (“PDR”) sector has proven difficult under the Eastern Neighborhoods zoning controls. It may already be time for the City to take a hard look at these controls to see what can be done to bring more PDR businesses and jobs to the Eastern Neighborhoods.

As many readers know, the Eastern Neighborhoods Program was adopted in late 2008 and early 2009. Part of the implementing legislation requires the Department to produce five-year monitoring plans, with the first one looking back to 2006 in order to get a sense of the initial transition to the new zoning controls.

The Eastern Neighborhoods Program consists of area plans covering four neighborhoods: Central Waterfront, East SoMa, Mission, and Showplace Square/Potrero Hill. The basic thrust of the Eastern Neighborhoods Program was to transition about half of the existing industrial areas in these four neighborhoods to mixed use zones that encourage new housing. The remaining half would be reserved for PDR districts.

The Eastern Neighborhoods Program recognized that PDR activities, occurring largely in the Eastern Neighborhoods part of the City, provide critical support to the drivers of San Francisco’s economy, including the tourist industry, high tech industry and financial and legal services, to name a few. PDR businesses tend to provide stable and well-paying jobs for the 50% of San Francisco residents who do not have a college degree.

Given the importance of PDR to the Eastern Neighborhoods Program, the Planning Commission expressed its concern in receiving the first Monitoring Reports that San Francisco is not getting enough PDR in the Eastern Neighborhoods. The Reports showed the following:

• New Development and PDR Loss: Approximately 118,550 square feet of new PDR space was built in the Eastern Neighborhoods between 2006 and 2010. This represents over half of new PDR space built in the last five years. However, commercial development projects in the pipeline will result in the loss of approximately 325,300 square feet of PDR space in the Eastern Neighborhoods, representing two-thirds of all PDR space loss citywide.

• Development Pipeline: The Eastern Neighborhoods will be a small contributor to new commercial development in San Francisco with just over 1% of proposed commercial development square footage in the Eastern Neighborhoods. The major addition to the San Francisco General Hospital – just under 548,800 square feet – makes up the bulk of commercial projects under construction in the Eastern Neighborhoods. Construction of new commercial space is being offset by conversion or demolition of existing commercial space, mostly in the light industrial PDR sector.

• New Commercial Construction: New commercial development built in the Eastern Neighborhoods between 2006 and 2010 can support approximately 2,670 retail and office jobs. An additional 128 light industrial PDR jobs are expected to be accommodated in the new PDR space built.

• Commercial Pipeline: Assuming an average employee density of 350 square feet, an estimated 1,670 office and retail jobs can be accommodated in the proposed commercial development pipeline in the Eastern Neighborhoods. Proposed conversion of light industrial PDR space to residential or other commercial space, however, could mean the loss of about 680 PDR jobs.

The Commission and members of the public discussed a variety of possible solutions to the PDR problem, the common denominator of which was to increase flexibility in the PDR controls. One specific suggestion was an easing of the square footage controls for Small Enterprise Workspaces (SEW). Another suggestion was to ease the limitations on Integrated PDR. Yet another suggestion was to loosen the definition of what qualifies as PDR.

Concerns were raised about “moving too fast” on changes to zoning controls in the Eastern Neighborhoods. It is our hope that the City will keep an open mind about these issues and take needed action sooner rather than later, particularly considering San Francisco’s immediate economic needs. If the City were to show flexibility with PDR, there are plenty of worthy projects out there that could and would happen to the great benefit of the Eastern Neighborhoods and the City as a whole.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

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