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Framing the future of
downtown San Francisco
Two main paths are possible for the city's core, but will
either one produce the downtown we really want to have? • by Egon Terplan and Lisa Bell
This article presents some of the key questions
we should be asking about the direction of our
downtown. It also officially kicks off SPUR's
Future of Downtown policy project.
This article appears in the March 2007 SPUR Newsletter.
Just more than 20 years ago, San Francisco
approved its first-ever comprehensive plan for
downtown. Responding to the growth boom
of the 1970s and early 1980s, the Downtown Plan
presented a vision that strengthened our historic
job core, limited new high-rise development to the
north and west, protected neighboring historic
areas such as Chinatown, Jackson Square and
Union Square, and focused new office growth
south into SOMA.
The vision encouraged
housing around downtown and encouraged transit
ridership through limits to parking downtown.
This vision of the Downtown Plan largely has
been fulfilled.
Today, San Francisco's downtown is at
a cusp of another change, which requires
careful thinking and planning to make sure
that we create an appropriate downtown
for our economic and social needs.
The driving tension in our downtown is
between whether we will maintain our strong
office core or we will become a downtown
characterized by more mixed-use residential
and entertainment uses. These tensions are best
expressed as the conflict between the vision of
maintaining a "Central Business District" versus
moving more toward the creation of a larger
"Central Social District." Today, we already have
the beginning of a social district that extends
from the San Francisco Museum of Modern Art
past the Westfield shopping center and through
Union Square. New buildings such as the Four
Seasons on Market Street (in a site that was
originally proposed for office use) are indicative
of this emerging Central Social District.
While both the CBD and CSD can coexist
within a large downtown, the tension emerges
when different uses begin to compete for the
same space. This is happening in San Francisco,
particularly along Mission and Howard streets.
In 2007, SPUR is taking a close look at our
historic and evolving downtown to help determine
what "the future of downtown" should be like. With
this paper we both launch that project and frame
some of the key question we must ask, including:
- Will downtown's new residents work in San
Francisco, or will our downtown become a
bedroom community for Silicon Valley?
- Is there enough land for more office buildings
to support continued job growth?
- Can downtown become a viable
neighborhood if many of its residents are
working elsewhere during the day?
- What is the impact on our job base
if we make residential development a
higher priority than office uses?
- Can our downtown truly compete with
suburban office centers in the Bay Area
as a location for knowledge industries?
- Is the current growth of technology firms in
San Francisco indicative of a major new force
in our downtown, or a temporary trend?
- What is the role of other downtowns - such
as Oakland's - in housing our workforce
or in providing jobs for our residents?
- What policy tools best shape residential
demand or business location decisions?
This article presents both the Central Business
District and Central Social District models as
distinct and competing visions for the next phase
of downtown. We argue that the CBD model is
essentially the current vision as expressed by the
Downtown Plan of the 1980s, while the CSD is a
new mode based on a renewed interest in downtown
living and a belief that suburbs will continue to be
more competitive for business growth than central
cities. Despite their attractiveness, both models
end up failing as complete solutions to the needs
of our city. These failings must be resolved as San
Francisco plans and prepares its new downtown.
Downtown San Francisco today:
the Central Business District
The Central Business District is the traditional
high-rise downtown office district found in the
center of most major cities in North America.
The CBD model maintains an employment
core, with housing, entertainment and tourism
uses located in neighborhoods around the
edges of the CBD. It requires a regional transit
system to bring a wide range of workers from
the suburban areas into the downtown core.
The primary benefits of the model:
- Labor market: Access to wide range of
knowledge-sector and support-services
jobs for workers throughout the region.
Further, the presence of large corporate
employers provides many middle income
jobs that do not require college education.
- Environmental: Limits to parking and
centralized transit allow a high percentage of
workers to commute without their car. High
density promotes walkability within downtown.
- Economic: High concentration and
proximity allows greater interaction among
businesses within the core and facilitates
frequent face-to-face communication.
Yet the same success factors are also
failings. By focusing on being a nearly
exclusive office district, the CBD crowds out
other uses and places unnecessary limits on
its transportation infrastructure based on a
one-way commute. Further, recent economic
growth has been more likely to occur in
suburban office parks than urban downtowns.
First, by maintaining a nearly exclusive office
core, the CBD typically shuts down at 6 p.m.
Although surrounding neighborhoods in the
broader "downtown" have activity, the CBD model
inevitably results in an empty core in the evenings.
This means that downtown has limited services
for the few residents who do live there, or for
workers who stay late. And as a single-use office
district, it is particularly vulnerable to swings in
the real estate market, as the emptiness can seem
even more profound during economic downturns.
Second, the one-way commute pattern makes
inefficient use of our transit infrastructure.
BART trains enter downtown full and return
to the East Bay nearly empty. And with limited
capacity in the Transbay Tube (during the
dot-com boom, BART reached full capacity
and many commuters shifted to AC Transit),
continued job growth in the downtown without
comparable nearby housing growth leads to
more commute trips for a system lacking much
room for expansion. This leads many to claim
that achieving a greater jobs/housing balance is
a desirable goal for downtown San Francisco.
 Third, the CBD vision of the office center
was in fact a replacement for the loss of an
earlier, more mixed-use downtown (think of the
downtown department stores of the 1950s and
1960s). The CBD responded to a concentration
of corporate services in key global regions, and
benefited cities such as San Francisco, New York
and Boston. But some argue that today's urban
centers can no longer compete with more affordable
suburban environments, which suggests that cities
must find an alternative to remain successful.
Despite these challenges of the model, San
Francisco still retains a strong CBD, with among
the highest commercial rents in the region. Yet
as jobs continue to grow at a faster rate in the
suburban areas and our share of the region's office
market and jobs continues to decline, we must
reconsider our competitive advantage as a city.
Further, the desire for a thriving center at all
times of day befits a global city such as ours. Many
thus consider the Central Social District a viable
goal and alternative to the current CBD model.
A possible alternative:
the Central Social District
The Central Social District - a phrase attributed
to the Urban Land Institute's William Hudnut,
who learned it from a business person describing
the transformation of downtown Chicago - is
a vision of a downtown with increasing numbers
of residents as well as new restaurants, shopping
and entertainment opportunities. While office
uses would remain, the goal of the CSD is to
create a mixed-use, livable, 24-hour downtown
neighborhood. The CSD is associated with cities
such as Vancouver, Paris and Barcelona, where the
center is a place of interaction, culture and living.
The CSD idea is predicated on two notions.
First: Central cities cannot compete with suburban
locations for jobs and businesses. Future job growth
will continually favor suburban areas at the expense
of traditional CBDs. This suggests that cities
need to focus on their core advantage in historic
buildings, entertainment and a dense, walkable
core, and also expand activities that range from
shopping to theater to music. Second: Reducing the
jobs/housing imbalance through adding housing
in the urban core is a way to combat urban sprawl.
This second notion assumes that San Francisco
has more than its share of jobs but lacks sufficient
housing to support its workforce. Reducing the
imbalance emphasizes building more housing
for our workforce while being less concerned
about expanding the already large job base.
The primary advantages of the CSD:
- Reinforces a core competitive strength of
center cities such as San Francisco - as a
destination for experience and entertainment.
Given the high cost burden of San Francisco
(rents, taxes, labor costs) and the limited
political support for economic growth, it is
likely that we will continue to see a greater
share of the region's jobs continue to locate
in the suburban counties of the Bay Area.
- Responds to the continued demand for
residential production in San Francisco. The
CSD then becomes a strategy for capturing a
greater share of the overall population growth
(and locating those residents downtown).
- Provides housing nearer to work and gives
downtown more life after the offices close.
- Recognizes that downtown is one of the
few districts citywide where high-density
housing is politically acceptable. If we wish
to add significant units to our housing stock,
building high-rise downtown neighborhoods
is perhaps the most likely approach.
While the Central Social District
model is appealing, there are significant
downsides to it, particularly for San Francisco.
These include limits to economic growth,
potentially decreased job quality, reduced
densities, increased rents and more cars.
First, economic growth in the CSD model
may be diminished as the remaining sites for
office buildings become used for new residential,
retail or other non-office uses. Already, much of
the areas in and around the Transbay Terminal
are proposed for residential development. Given
that downtown's growth is constrained to the
north, east and west, the only areas for growth
of the office district are into SOMA and up
Market Street. Further, as millions of square
feet of office space convert to residential, there
is a possibility we could actually reduce the
total number of jobs within our downtown.
As previously noted, one of the main
advantages of a concentrated office downtown is
access to a range of jobs for workers from through
the region. If this job concentration is reduced,
through downtown increasingly becoming a social district, the new jobs will become further
spread throughout the region. This means that
these jobs won't be as easily available to the broad
range of the workforce who can currently arrive
in downtown San Francisco by way of existing
transit infrastructure. This trend thus reduces
the competitive advantage of our downtown as
a center of commerce and harms the ability of
local residents to access good jobs. There also is a
potentially negative fiscal impact in the conversion
of office space to residential use, given the
importance of the revenue from San Francisco's
payroll tax and the City's lack of an income tax.
Second, as we increasingly convert to a
Central Social District, the quality of jobs also
decreases. Average wages in the "experience"
industries (accommodations, performing arts,
retail, restaurants) most associated with a CSD are
significantly less than in the knowledge industries
(finance, IT, professional services, insurance)
that cluster in a CSD. Nearly 70 percent of the
experience-sector workers are in jobs that pay less
than $40,000 per year (and have either high school
or some college education). For workers with a
bachelor's degree, only 3 percent of experience
sector jobs pay greater than $70,000. In contrast,
about 35 percent of growing knowledge sector
workers with bachelor's degrees earn more than
$70,000 per year. If we prioritize an economic
development pattern with significantly lower
earnings per worker, we produce demands for
other needs such as affordable housing.
Third, as we increase the residential component
of our downtown, the density may decrease.
This is because residential dwellings typically
are lower density per square foot than offices.
Average office workers take up about 250 square
feet while small apartments (for one person) often
are greater than 600 square feet. For example, a
300,000-square-foot building might support more
than 1,200 office jobs but only 500 residents. The
residential building may support only minimal jobs in property management and security.
Fourth, as office is converted to residential,
rents on remaining space will rise and have a
disproportionately negative impact on startups and
nonprofit organizations. This trend occurs because
residential conversions tend to happen to older
office buildings, which are historically Class B space
(Class B buildings are typically well-maintained
but were constructed before 1965). These buildings
offer space at rents almost $11 less per square
foot than Class A buildings in San Francisco and
thus are more likely to house space for nonprofits
and startups. If that lost space is ever added back
to the overall supply, it is likely to be as Class A
office space at higher rents. Residential conversion
typically results in rising rents for remaining
office buildings if demand remains constant.
The conversion trend is growing. While
more than 700,000 square feet of office space
already has been converted from office to
residential or hotel uses, another 1 million
square feet are in construction and more than
3 million are approved or proposed. If much of
this space is ultimately converted from office
to other uses, it will be equivalent to the loss
of more than 10 Transamerica pyramids.
Finally, car usage in a CSD may increase. As
employment concentration declines, many of the
new residents will out-commute to jobs throughout
the region. Since residential construction is
currently providing more parking spaces per
capita than office uses, this is likely to continue.
The increase in driving is counter-intuitive to the
notion of living downtown. However, given that
many jobs throughout the region are in places that
do not permit easy transit access, many of the new
downtown office workers will drive from their
high-rise homes to the jobs in the suburban regions.
This trend is already happening in Chicago and
New York, particularly for residents whose jobs are
outside of the city. Today, commuters are much
more likely to drive to jobs that are more than a
10-minute walk from a BART station. If residential
uses emerge on potential office sites closer to
Market Street, new office spaces may be pushed
to areas that are less accessible by transit, further
increasing the demand for driving to these jobs.
Conclusion
There are no doubt drawbacks to both a pure
Central Business District or Central Social
District model of a downtown. Taken to their
logical conclusions, both visions fail to meet
the needs of our dynamic and changing city.
The way we resolve this ongoing tension
between CBD and CSD is as of yet unclear.
Further, many of the factors that influence our
downtown are external. Demand for downtown
living is driven by demographic changes and
social forces that shape people's preferences
for where they want to live. While individual
firm location is still most influenced by the
distance to the chief executive officer's home,
the scope and size of our economic base results
more from emerging technologies, changing
global investment patterns and competitive
pressures from other metropolitan regions.
Given these factors, our ability to shape our
downtown is inherently limited. Zoning, tax policy
and investment in the public realm are three of our
most powerful tools. We must also consider changes
in other regional centers. Downtown Oakland could
become a larger job center, thus strengthening
the "reverse commute." East Bay and Peninsula
communities could increase the production of
housing near BART and Caltrain stops and thus
facilitate greater transit commuting. Understanding
these scenarios is part of helping determine the
role of downtown San Francisco in the Bay Area.
Ultimately, the measure of success for our
downtown should be based on outcomes:
- Labor market: availability of wide
range of jobs for San Franciscans and
workers throughout the region.
- Environmental: concentration of development
near transit to allow residents to commute
to work and get around their home
community on transit/without a car.
- Social: increase face-to-face contact
among a diverse population.
Both the CBD and CSD help achieve these
outcomes.
This article presents a preliminary set of
questions about the future of our downtown. The
real work will take place in the upcoming year.
Our goal is to help inform the decision we make
today to shape the downtown we need as a city.
Egon Terplan is SPUR's policy director for
economic development and governance, and
will lead the Future of Downtown project.
Lisa Bell is a graduate student at the University of
California, Berkeley's Goldman School of Public Policy.
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