Preserving SF’s light industry through the power of magical thinking…

10 02 2014

On Thursday, February 6, 2014, the Planning Commission heard one of the first proposals for a major modification to the 2008 Eastern Neighborhoods plan which many CCHO organizations worked hard to develop. Unfortunately, this new proposal is yet another example of Planning Department and Office of Economic Development staff’s power of magical thinking. The proposal allows new buildings with 2/3 office spaces (ie, high-end tech sector spaces), in exchange for 1/3 PDR, in the last few areas left for PDR uses. PDR, or Production, Distribution and Repair, is the Planning Departments language for light industrial. There is no guarantee that the PDR space will be affordable, or that there will be any local hire, job training, or placement with local schools or workforce development programs. Allowing potentially 2 Million s.f. of tech uses (according to Planning Department data) in otherwise PDR-only areas could well result in driving up land prices in the surrounding PDR zones, and create yet another incentive for further rezoning to change the remaining PDR uses to tech office.

In line with the magical thinking paradigm, Planning and OEWD staff promote this as similar to inclusionary housing. It’s completely different – inclusionary housing requires a minimum percent of permanently affordable, price controlled uses, and it is not used to promote housing where it is currently illegal (as this proposal does for office).

While there may be some good things in the proposal (in fact, this sets up a useful precedent when considering other changes to restricted PDR uses, such as is being contemplated in the Central SOMA Plan), the fact that OEWD and Planning staff have not consulted with any of the PDR employment advocates in the Eastern Neighborhoods, means it has a long way to go to be fully baked.

Our fundamental recommendations would be to ensure that these are truly affordable, price-restricted PDR spaces, with requirements for local workforce hiring. And given the uncertainty of the proposal, to develop this as a “pilot program,” with a maximum of 500,000 s.f. of tech offices (about the size of two Twitter offices), with careful anlaysis before choosing to build more.

Chosen_Hamm's(Painting by Dan McHale)


Some History

Since the heyday of multiple story industrial buildings in the 1930s and 40s, buildings which in great measure have been allowed to be converted to residential and tech uses, we have arrived at an economic reality where it is simply infeasible to build new industrial space except for one story (and sometimes two) tilt-up concrete buildings, an unrealistic development typology for premium-priced real estate in San Francisco. This is why so much of SF’s once-again growing manufacturing sector is moving out to places like San Leandro, where zoning, building typologies and economic reality actually match.

In the late-90s to mid-2000s, most of our traditional industrial zones were still defined by the M zoning (for Manufacturing), which was intended for industrial uses. This zoning from the 1950s had the misfortune of being relatively flexible and allowed other uses, such as live-work lofts and dot com businesses, masquerading as “light industrial” and “business services,” to begin moving into these lower rent areas, displacing PDR and driving up land prices. Moreover, the industrial areas did not have the appropriate transit and infrastructure to support either residential uses or the higher worker density of dot coms, which is often closer to one employee per 100 s.f.. The existing PDR uses (auto shops, print shops, small manufacturers, sewing factories, etc.) employed many immigrants and people with limited educational attainment. This was a big part of why folks in local organizations such as PODER, MEDA, and DSCS, as well as CCHO, pushed for the retention of PDR uses through the 8-year Eastern Neighborhoods rezoning process.

The original intention of the Eastern Neighborhoods PDR policy was:

  1. To identify certain transitional areas of industrial zones, and to allow those higher intensity uses that would knowingly drive up land prices. This resulted in the new “mixed-use” zones (MUO, MUR, UMU) from former industrial areas, with a huge boon to land developers with assured certainty of their office and residential proposals.
  2. To create harder controls around the much fewer remaining industrial uses, now called PDR, to not allow residential or office uses that would drive up land prices and drive out industrial uses. While Planning and OEWD staff seems to see this as “taking” allowable development from the landowners, it was entirely consistent with the intent of the previous M Manufacturing zoning.
  3. To allow some creativity for PDR uses and bonuses for developers that might create other advantages, such as the new IPDR category that allowed up to 2/3 office in exchange for certain “disadvantaged” workforce hiring policies.

From the community’s standpoint, the city already gave away the farm when it rezoned so much of the Manufacturing areas into MUO, MUR, UMU, and allowed a spate of “legalizations” of illegal office uses (and soon to be before you, legalizations of illegal live-work lofts). While protecting a few remaining PDR buildings, the Planning Department simultaneously zoned for PDR uses on certain parking lots but also zoned for heights on those parking lots that were not realistic for industrial developers, but brought dollar signs to the landowner’s eyes, thus halting any potential industrial development on those sites. Now, with a resurgence of San Francisco’s manufacturing sector, we are seeing that the last few remaining PDR buildings are now at capacity, and a business sector that we very much want to remain in our city is facing some hard choices. The rampant conversion of the city’s industrial spaces allowed by Planning policies of the last decade is perhaps water under the bridge now, but we can’t escape the simple fact that neither Planning Department or OEWD have the best track record in leaning forward to preserve or promote industrial uses for the long haul. So, we implore caution as the Planning Commission considers yet more creative ideas about modifying the City’s limited remaining PDR lands.


Office/Tech Bonus for 1/3 PDR

Rather than rezone the heights on “under-utilized” sites to be appropriate to the economic reality of tilt-up concrete industrial buildings, the thinking here seems to be allowing a tilt-up concrete building on the back of a site, and a five story tech office building along a fancy new boulevard (getting to the 1/3 PDR to 2/3 office mix). Extrapolating forward with this zoning vision, 7th Street becomes lined with tech offices along a beautiful new boulevard. Is that appropriate land use policy for the area?

Note that the 16 parcels combined that would be subject to the change allowing new office on 2/3 of each parcel, would allow a total of over 2 Million square feet of tech uses in the PDR districts. 1.5 Million of those would be in the area along 7th Street, including Recology and various parking lots, a truck rental place, and a mini-storage. A squishy definition may leave it open to political re-definitions, as we have experienced in the past such as with the Furniture Mart, extending it to even more parcels.

Even if this creative idea will work as it is currently presented, creating new PDR spaces, can you guarantee that these will actually be affordable spaces, at the $1.25 to $1.50/s.f. that current local manufacturing can afford, or that the community will get the local jobs benefit that PDR promised? The proposed zoning has no guarantee that the PDR space will be affordable, or that there will be any local hire, job training, or placement with local schools, City College, or workforce development or entrepreneurship programs, or any future relationship to Promise Zones. Planning and OEWD, along with SF Made, instead presents a hypothetical “business plan,” that the site developer would work out for hypothetical future PDR users. If this quid-pro-quo is at all to work, the City needs much harder assurances.

The ordinance puts a big stress on the CU process for these types of projects, saying in considering whether to approve a project, the planning commission shall consider, among other things: “(A) The likely viability of the new PDR space created by the development, as influenced by such factors as whether the project sponsor has developed a PDR business plan, has the commitments of established PDR tenants, and/or a demonstrated relationship with organizations established in the PDR community.” This “demonstrated relationship” needs to be spelled out specifically to include workforce development and economic development organizations, industrial and entrepreneurship programs at City College or local high schools, and a relationship with existing or future economic development models, such as Promise Zones.

  • Recommendation:   Slow this process down to allow full vetting of the development scenarios and the PDR/Office ratio proposed by Planning Department and Office of Economic Development.
  • Recommendation:  Particular parcels subject to Section 219.1 should be specified by Assessor Parcel Number in the legislation, in the “Geography” section of the ordinance, rather than allowing any ability for loopholes.
  • Recommendation:   Only allow up to 500,000 s.f. of office as a pilot program under this mixed-development program, then call for a hearing and discussion on whether to extend to allow full use, and at what ratio of PDR to Tech. This would be a similar approach as has been used in the “micro-units” legislation.
  • Recommendation:   Allow the new office bonus only if developed pursuant to a Development Agreement with the city, with full collateral agreements involving workforce development organizations, for any projects approved under this new optional zoning classification, so that the city and community can hold the developer/owner accountable to the promises they make. Since what is contemplated is only about 20 properties, each over 20,000 s.f., this should be a reasonable approach.
  • Recommendation:   Require that these developments result in deed-restricted permanently affordable “inclusionary” PDR space (with lease rates maximum $1.50/s.f., to be reset on a regular basis based on the citywide average of prevailing rental rates for restricted PDR uses)
  • Recommendation:   Define precisely restricted “PDR” uses allowed in this PDR space.


IPDR (Integrated PDR)

The longstanding “accessory use” allowance for PDR/industrial districts has been maximum 30%. The Planning Department and Office of Economic Development argue that whatever they can come up for the new construction space (ie, a CU process and “the PDR Business Plan” can simply be applied just as easily to the IPDR). But the IPDR concept was a far different one – to demand job hiring and training in exchange for this higher allowable office use, ie, PDR with 50% office. Local organizations originally wanted harder local hiring and training controls, and only 50% accessory office, but this is what we got. The current proposal does away with the “disadvantaged” hiring policies within IPDR, but still allows PDR uses with 2/3 office use on otherwise PDR-only areas.  As SF Made has told us, there has been no interest since the IPDR category has existed for PDR spaces with any accessory use beyond 1/3, so there should be no real constituency for this (except perhaps landowners/developers that may want to use it to their advantage). “Cherry picking” pieces of the IPDR zoning category and eliminating others as is proposed by Planning and OEWD staff represents no one’s public policy interests except as a potential for future land speculation.

  • Recommendation:  Do away with IPDR entirely, since it does not seem to work, and the only reason for it originally was to promote local hire and job training. Without the workforce requirement, it is a giveaway for property owners to convert PDR buildings into Tech buildings.


SEW (Small Economic Workplaces)

The Small Economic Enterprise (SEW) buildings represent a different kind of creative-thinking problem: creating a flexible use category (like the old M-zoning) that now runs up against changed economic realities of “higher and better uses” that can take advantage of this flexibility. By allowing up to 100% office uses in spaces up to 1500 s.f., the current legislation actually encourages dropping a series of 5M tech incubator buildings in the PDR districts, pushing out PDR once and for all.

In the mid-2000s, SEW responded to a new building type, exemplified by ActivSpace on 18th and Treat in the Mission. The original idea from Planning was to incentivize these buildings, by allowing small spaces with office and personal services in PDR-restricted zones. For PDR uses, these small spaces demand a far higher per s.f. rate (above $3.50/s.f.) than typical PDR spaces (closer to $1.25 to 1.50/s.f.), but does work for some small upscale manufacturers. Planning staff argues that the office allowance in SEW buildings is already allowed in the 2008 EN Zoning. However, when the EN was passed, the idea of a dot com hub of small incubator spaces did not exist. While the Planning Department and Office of Economic Development may now wish to promote such spaces in other zoning districts appropriately served by transit and other infrastructure for high density workplaces (such as 5th & Mission where the 5M incubator hub is located), these office uses would not be appropriate in PDR districts and would easily displace lower margin industrial uses.  Planning and OEWD staff argue that uses like ActivSpace need some flexibility that may vary over time in order to make their finances work. We agree that we should allow some flexibility up to a certain amount. For example, allowing 1/3 office as primary uses, when combined with the 1/3 office accessory in the rest of the PDR uses, could allow SEW buildings to have up to a total of 50% office uses, which is considerably more than adjacent PDR buildings, but may be necessary to make this model work financially.

The ordinance also allows, “(3) Where permitted, S.E.W. Buildings are exempt from the controls in Sec. 230 limiting demolition of industrial buildings.” SEW should not permit demolitions of existing viable PDR uses, potentially demolishing viable larger floor plate PDR spaces that will never be brought back.

  • Recommendation:  Allow ONLY up to 1/3 office uses as primary use in the SEW, consistent with PDR accessory uses elsewhere.
  • Recommendation:  Allow demolition of PDR only if under .5 FAR of existing PDR building on site.