The proof is in the permits: Empty downtown SF offices slow construction

The proof is in the permits: Empty downtown SF offices slow construction

The number of expensive permits builders have filed with the San Francisco Department of Building Inspection has plummeted since the pandemic, as projects ranging from office towers to apartment complexes to home improvement projects multi-story tenants in the Financial District have been suspended or canceled.

Department data shows that so far in 2022, through the end of August, only 42 work permits worth more than $5 million have been filed, totaling around $1.4 billion. dollars in electrical, plumbing and construction work. If that pace continues, this year will be weaker than 2021, when 86 permits worth $2.9 million were filed.

And it will be much the same as in 2020, when pandemic lockdown rules did not allow non-essential construction, which included commercial and retail projects. That year, there were 60 permits over $5 million, totaling $1.3 billion.

The number of major construction projects this year is expected to be 70% lower than the high-flying days of 2018, when 184 permits were issued for projects over $5 million, a range totaling $7.3 billion. dollars.

While the focus in San Francisco has been on restarting stalled multi-family projects that help tackle the area’s housing shortage, construction industry leaders say it’s This is a less sexy and misunderstood category of “tenant improvement” projects that is also responsible for the drop in construction. work.

With office buildings still at less than 50% capacity and the majority of Financial District workers still at least partially remote, the city saw 2.6 million square feet of office leasing activity through June , on track to end the year with approximately 5 million square feet. That’s less than the 6.5 million square feet of rentals that took place last year and a far cry from the 13 million square feet of deals completed in 2018, or the 11 million in 2019.

An entire ecosystem of workers who depend on tenant improvements — architects, carpenters, electrical contractors, drywallers, painters, plumbers, movers, HVAC technicians — are scrambling to make up for lost income. Currently, about 1,300 unionized construction workers in San Francisco are out of work, according to Rudy Gonzalez, secretary-treasurer of the San Francisco Building Trades Council.

“For some trades, (rental improvements) can be a third of their hours and for others, half,” Gonzalez said. “Most of that work has dried up.”

Alex Lantsberg, director of research and advocacy at the San Francisco Electrical Contractors Association, said “downtown office work (tenant improvement) was a daily bread job for many contractors.”

“The office employment slump has had downstream effects on the people behind the scenes preparing those offices to be occupied,” Lantsberg said.

He said the lack of jobs has prompted unionized electricians to crack down on “unorganized contractors who earn work through wage theft” and seek new markets like large photovoltaic storage facilities, vehicle infrastructure electricity and advanced control of energy-efficient technologies.

“(International Brotherhood of Electrical Workers) Local 6 has several hundred members ready to get to work and we are looking at every opportunity to advance union work,” Lantsberg said.

Patrick O’Riordan, director of the Department of Building Inspection, said some of the slowdown can be attributed to the pandemic, but it’s also a reflection of natural economic cycles in a city that — dating back to the gold rush – has always been susceptible to extreme booms and busts.

“Anyone who’s ever worked in construction knows it’s a cyclical business,” O’Riordan said. “I don’t know a single person who works with their hands who hasn’t had overtime during good times and been laid off during slow times. As a former carpenter, I know this cycle firsthand.

O’Riordan pointed out that the current permit business is actually busier than it was in 2010 and 2011 as the city recovered from the Great Recession. In 2010, the city saw 28 permits filed for work exceeding $5 million, totaling $728 million in work.

“You can see we’re in better shape than in the past,” O’Riordan. said

He also said the frenetic level of activity reached in 2019 was “overheated” and not entirely healthy for the economy.

“On paper it looks great. But, on the ground, there were significant pressures on the construction industry with rising material costs and scarcity of labour” , O’Riordan said.

He turned to Hayes Point at 30 Van Ness Ave. – a billion-dollar project that has just been launched – and other developments that are preparing to start work, including 10 South Van Ness, a 55-story tower that will have 966 units.

While a few projects buck the trend and forge ahead — like the Mission Rock development across from Oracle Park — some of the city’s biggest projects are on ice. This includes eight major developments in the Central SoMa area, where the city passed a plan in 2018 to enable massive growth to accommodate more than 30,000 jobs and 20,000 new residents. The rezoning is centered on the much-delayed central metro project.

Gonzalez said he thinks 2023 could very well be a comeback year for the construction industry — but that will depend on economic forces beyond the purview of city bureaucrats and local lawmakers.

“You have developers who are willing to take risks and entrepreneurs who have a workforce ready and ready to go,” Gonzalez said. “But you have financiers looking at profits and saying, ‘Not so fast.’ They are looking for maximum profit and for them it is all about knowing when will be the most profitable time to start.

JK Dineen is a writer for the San Francisco Chronicle. Email: jdineen@sfchronicle.comTwitter: @sfjkdineen

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