The High-Rise Hegira

From nostalgia for the good old days to mandatory Postmodernism
Article
July 1, 1999

The Revolt Begins

Initially, the debate over high-rise growth focused on building design rather than overall economic growth. In 1970 and 1971, the city Planning Department issued an Urban Design Plan and adopted height and bulk limits for high-rise office buildings. The Chamber of Commerce extolled the virtues of San Francisco becoming a major headquarters city, with large banks and corporations ensconcing themselves in signature high-rise buildings, which the Chamber viewed as an unmitigated blessing. Civic activists, however, placed height limitation initiatives on two successive ballots, both of which lost.

The most damning allegations against high-rises were contained in The Ultimate High Rise, edited by Bruce Brugmann and Greggar Sletteland. Accusations against high-rise office buildings ran as follows:

- Fiscal impact-high-rise offices in the central business district contribute less in taxes than they cost in city services. Furthermore, the presence of these buildings has caused neighborhood property values to soar, resulting in the neighborhoods providing an ever greater share of total city tax revenues.

- Demographic impact-high-rise office growth in the city has driven 100,000 middle class residents to the suburbs, caused the loss of 14,000 blue collar jobs, and tripled welfare costs. New jobs in high-rises go to suburbanites, while jobs lost were held by city residents.

- Environmental impact-high-rise office growth causes air and water pollution that cost the city $1 billion to clean up, and imposed an additional $5 billion in region-wide costs to alleviate traffic congestion.

 

SPUR Responds...

Given the intensity of debate and the lack of clear answers about the value of high-rise growth, SPUR began casting around for funding to conduct an objective, methodologically sound study of the issue. With a $200,000 grant from the U.S. Department of Housing and Urban Development (HUD), and $75,000 provided by the Mary A. Crocker Trust and the San Francisco Foundation, SPUR's Impact of Intensive High-Rise Development study began in 1971, and took four years to
complete.

At HUD's urging, SPUR agreed to combine two separate proposals that were circulating for funding. One focused on urban design, the other on the economic and environmental impact of office growth. This resulted in the study being conducted by a large, somewhat unwieldy team of consultants. Nevertheless, this effort proved to be the definitive, pioneering study of its subject matter, and, as will be seen, provided an analysis of the problem and prospects for future growth that proved to be both accurate and perceptive over the following two decades.

The study posited two sets of office height limits, the 160' ceiling proposed by the most recent ballot initiative, and existing city planning regulations; and two levels of office growth, 10 million additional square feet, which was almost certainly going to occur by 1980, and 30 million additional square feet, which the authors believed to be an amount far beyond what anyone could realistically contemplate by 1990. The purpose for this high projection was to see whether any thresholds existed that would constitute a serious barrier to continued growth.

SPUR's study found that office growth provided more fiscal benefits than costs, was a significant source of new jobs for San Franciscans, and imposed, for the most part, reasonably manageable impacts. One issue that could pose serious problems, however, was transportation.

Additional, more manageable impacts were identified throughout the document, with suggestions for possible corrective actions. It served as a basic menu of issues for SPUR to address in the future. For instance, the study concluded that most new growth, whether in high- or mid-rise buildings, would occur South of Market, and suggested this area needed additional amenities to be an attractive location. This subsequently prompted SPUR to call for preparation of a plan for the South of Market, which at that time was "an unplanned hole, in a well planned doughnut." (See SPUR Report #117) The report also reinforced the importance of SPUR's traditional areas of concern, such as housing, transportation, regional planning, and urban design.

SPUR's study was dry, definitive, and comprehensive. It had the potential to shift the debate over further office development toward a more thoughtful dialogue. But the summary of the massive report voiced its conclusions in a particularly impolitic choice of words:

The study results...show that intensive high-rise development is in San Francisco's long-run economic interest.

While this was the same language used in the title of the study – intensive high-rise development – it implied a bias toward high-rises that the study did not support. A more appropriate phraseology would have been along the following lines: Continued office development, whether high-rise or mid-rise, is in San Francisco's long-term economic interest.

But the cat was out of the bag. SPUR's Board was outraged, as were several of the study's consulting team, because of those four hot button words – intensive, high-rise development. The controversy, for the moment, obscured the genuine value this innovative analysis provided for clarifying, if not resolving, the ongoing debate.

...And So Does City Planning

The city Planning Department finally weighed into the debate with its first ever study of the San Francisco economy. In 1977, it issued the Commerce and Industry Element to the city's Master Plan. Finally, the debate was shifted from building configuration to economic growth. This study found the following:

- Center cities are no longer free-standing economic and social units, but rather are the centers of metropolitan areas. These areas function as integrated regional economies.

- San Francisco is not alone in experiencing the loss of blue collar jobs. Center cities across the country are experiencing the same phenomenon, because of population shifts, technological changes, tax and labor costs, and transportation access. Indeed, the entire Bay Area is not a particularly competitive environment for new blue collar employment.

- Continued job growth is necessary to offset the normal job losses that occur in any dynamic economy, and to generate the growth in tax revenues necessary to cover the increasing cost of local government. In other words, without economic growth, job loss occurs, and the tax burden increases on non-commercial properties.

- San Francisco's greatest competitive advantage in the region is in such office-based jobs as finance, insurance, real estate, and in business services. This is the principal source of employment growth for city residents.

- Costs imposed by continued office growth should be carefully monitored and weighed against benefits. There are limits to growth, but growth should not be viewed as an either/or proposition. Instead, future development should be managed so as to maximize benefits and minimize costs.

The main upshot of this analysis was to call for a more conscious effort than had heretofore occurred to shape in a positive way the city's economic growth, within the limits recognized as to how much flexibility was possible. Both Mayor George Moscone and Mayor Dianne Feinstein sought to carry out this mission (SPUR Report #136).

 

The Debate Shifts from Shape to Size

For all intents and purposes, SPUR's high rise study and the Commerce and Industry Element provided definitive answers to the debate over whether San Francisco should have high-rise office buildings--they demonstrated that the question was irrelevant.

The real issue was about economic growth. How should it be managed? How could its adverse impacts be mitigated without halting it entirely? These questions predominated the second decade of debate.

Further action was prompted by, once again, a citizen initiative limiting office growth that qualified for the November, 1979 ballot. This was far more sophisticated than previous efforts, imposing bulk as well as height limits, restricting use of density bonuses, and, for the first time, seeking to require office developers to provide additional benefits to directly offset the costs they imposed, such as more public transit, open space, housing, and, in the post-Arab oil embargo era, energy conservation. The ballot initiative was inspired by a sudden surge in office development in the city. Between 1976 and 1983, a total of 2.3 million square feet of office space was either being built or projected per year, compared to an average of 1.6 million square feet between 1966 and 1975.

Placement of this proposition on the ballot prompted the San Francisco Board of Supervisors to finally respond positively to the city Planning Department's long sought funding for the preparation of a comprehensive downtown plan. While applauding the Board's action, and suggesting interim growth controls be adopted while the study proceeded, SPUR did not endorse or oppose the proposition itself (SPUR Report #157).

Once again, the effort to control growth by ballot failed, albeit by an even smaller margin of defeat. Sponsors of the initiative threatened to go to the ballot again, posing for the business community a never ending series of fights over controlling office development.

Planning Commissioner Charles Starbuck, who had excellent ties to the growth limit forces, then negotiated a compromise. If the business community would provide the funding for the next phase of the Planning Department's downtown plan, and if meaningful interim controls over growth would be adopted by the Planning Commission, future initiatives would be held in abeyance while the plan and its environmental impact report were completed. The business community agreed, and a total of $454,000 from business, developer, and foundation sources was raised. SPUR became the fiscal agent for the study, and then-Executive Director John Jacobs was one of three board members overseeing the effort.

In the meantime, other work was occurring on the general issue of growth. The Chamber of Commerce had begun a sophisticated strategic plan for the city's economic future, and a look at regional infrastructure needs was under way under the co-sponsorship of the Association of Bay Area Governments, the Bay Area Council, and SRI International (SPUR Report #180).

 

The Deal Falls Apart

Early in his first term, President Ronald Reagan persuaded Congress to enact a tax cut that included very favorable depreciation provisions for new office buildings. This tax cut, and the general prosperity the country enjoyed after going through the recession of the preceding several years, resulted in an unprecedented surge in office construction across the country. To give an idea of the magnitude involved, by the late 1980s, one half of all high-rise office space then standing in California had been built in the 1980s, in both city and suburb.

Even with interim controls, San Francisco was not exempt from this phenomenon. For example, SPUR's high-rise study of 1975 posited a high growth scenario of 80 million square feet of office space downtown by 1990, an amount assumed to far exceed the growth that would actually occur. The downtown plan EIR, completed in 1983, projected that office growth to the year 2000 would be in the range of 78-86 million square feet (SPUR Report #199).

There was both good news and bad news in this sequence of events.

The good news was that the downtown plan and its EIR found that the impacts of growth could, by and large, be mitigated. But it would not be easy, particularly with regard to the need for more housing and to take actions to reduce traffic congestion. It also largely agreed with the impacts SPUR had identified eight years earlier, with one interesting twist. Despite the rather dramatic amount of growth that had already occurred, regional transit service had been substantially expanded, commuters showed a willingness to use that transit, and the feared congestion threshold
identified in SPUR's earlier study had been deferred.

Most national attention to the plan focused on its innovative design recommendations. It forced a shift in office building design away from the International Style "refrigerator boxes" toward a more entertaining and varied Post Modernism, without actually using that term (SPUR Report #206-208). The bad news was that the growth that had occurred while these documents were being prepared was so explosive that the coalition fell apart, and the anti-high-rise forces decided to circulate another ballot proposition. The latest measure failed once again, but it prompted the Board of Supervisors to add a three-year growth cap of 950,000 square feet per year when they adopted the new downtown plan.

A downtown plan with an annual growth limit was a sort of oxymoron. The plan had as a basic premise that any office building which went through all the hoops required would automatically be approved. The plan clearly identified the negative impacts of office growth, and proposed specific measures to mitigate or eliminate these impacts. In other words, the developer of a proposed building had to design it in such a way, and include a specific package of fees and offsets, so that he or she could demonstrate conclusively that the building's benefits would far exceed its costs. To reject such a building required that the Planning Commission prove that it was bad for the city in quantifiable measurements relating to specific provisions in the plan.

The growth cap, on the other hand, required a developer to prove to the Planning Commission that a proposed building was better for the city than competing projects. This was done through a semi-annual "beauty contest," involving an incredible amount of discretion that at times became highly subjective. In the first round in June, 1986, the Commission rejected all buildings in the competition, on the grounds that the city did not "need" any of them. "Need" in real estate development is normally determined by the willingness of a developer and his sources of financing to commit to erecting a building (SPUR Report #227).

New York Times architectural critic Paul Goldberger wrote a column in 1985 heaping praise upon the downtown plan as drafted by the Planning Department as, "the finest downtown plan in the nation, a daring proposal that (does) more to tame the madness of overbuilding than any other city has even come close to doing." But he expressed one strong reservation. "No city has ever put an actual cap on growth the way the proposed 950,000 square-foot limit does for San Francisco, and there is good reason. Such caps are almost impossible to administrate."

Despite such warnings, and after scant experience with even a temporary growth cap, a faction of the Board of Supervisors placed still another proposition on the ballot, amending the cap and making it permanent. This time, the initiative, which SPUR opposed, passed (SPUR Report #230).

 

Behold the New San Francisco

Adoption of the downtown plan and a permanent growth limit essentially concluded the debate about economic growth in San Francisco, at least insofar as high-rise buildings downtown were concerned. But in many respects, the issue by this time had become somewhat superfluous. Enough office space was already approved and in the pipeline so that office development, irrespective of the growth cap, continued to average 2.3 million square feet per year throughout the 1980s. This high rate of growth caused the office market to soften, especially during the recession at the end of the decade. Office rents sagged and vacancy rates increased to an unprecedented 12%. San Francisco, for the first time in two decades, began to worry about its economic vitality, with Mayors Feinstein and Agnos developing sophisticated, aggressive economic development strategies.
Other efforts began on a region-wide basis (SPUR Report #234, 254).

In the meantime, a new economic hub emerged in the region. By 1990, San Jose supplanted San Francisco as the largest city in the Bay Area, and Silicon Valley came out of the recession as the unchallenged economic engine that was driving a highly integrated, interdependent regional economy. ABAG's heroic efforts to encourage compact urban development and city-centered job growth failed, as both jobs and housing stretched further and further away from the traditional core of the region. Indeed, if San Francisco Bay did not exist as a barrier to development, this region could by now look very much like Southern California. So much for the fears in the late 1960s about the "Manhattanization" of San Francisco.

Change continued into the 1990s. San Francisco now is far, far different from what it was in the 1960s. It is not the financial center of the West, or a World Headquarters City. Office development in the first half of this decade averaged a piddling 0.35 million square feet per year.

While office vacancy rates have returned to their historic low levels, and office rents are high, the composition of the work force is changing, with a smaller proportion of jobs in finance, insurance, and real estate, and growth predominating in business services. Corporate headquarters continue to relocate elsewhere, through mergers and acquisitions.

San Francisco has retained and expanded its role as a center of prestige retail. It continues to be a major tourist destination, because of the natural beauty of the region, the city's rich mix of races and cultures, and its cultural attractions. It benefits from the continued growth in Silicon Valley. Plans to develop a new UCSF campus in Mission Bay enhance the city's prestige as a center for medical services. And it now boasts a new industry, albeit one that primarily occupies low-rise buildings well
south of the Financial District – multimedia. It remains a very popular place to live, as evidenced by low residential vacancy rates and high rents.

 

The Power of Planning or Lack Thereof

Given where San Francisco is today, and where it was 40 years ago, one could argue that planning for the future made a difference, and a positive one at that. But it is humbling to think of the power of the other forces that were at work.

San Francisco is a major location for office buildings in which people process data. This is America's post-industrial economy, an economy in which, as former Planning Director Dean Macris so often said, "the office building is the factory of the future." That the city managed to snare its fair share of such buildings is reflected in the prosperity it now enjoys. That the city managed to retain a large middle class population is also to its credit. Other American cities were not so fortunate on
either front.

While it is true that strong reliance on the city planning process helped San Francisco preserve its quality of life, which is the primary criterion for where office workers wish to locate, that process did not encourage or discourage a specific rate of office development. Nationwide tax cuts encouraged that growth, and a national recession stopped and even reversed it. The unprecedented era of prosperity the region now enjoys can be attributed to the demographic impact of the War Baby Boom generation moving into its peak earning years, and spending money
accordingly.

At the regional level, as well as at the local level, it appears that the planning process has downsized and begun looking inward. Concern about such things as sprawl is re-emerging in the form of smart growth, but the solution is not ABAG's grand scheme for city-centered growth of the 1970s. Rather, it is a focus on planning new micro-communities that balance jobs and housing and create neighborhood streets reminiscent of small town Iowa.

Despite these caveats, SPUR played a meaningful role in the debate over growth in San Francisco through the 1970s and the 1980s. SPUR's high-rise study had remarkable staying power, both because of the perceptiveness of its analysis and because of the accuracy of its forecasts. The organization was in the thick of the debate, winning some battles, losing others. The debate itself became increasingly sophisticated over time. And it was great fun!Spur logo

About the Authors: 

Michael McGill is executive director of SPUR.