For YIMBYs and developers eager to advance housing construction projects, this week began with cries of “Ding-dong, the witch is dead.”
On Monday, California legislators and Gov. Gavin Newsom approved one of the most significant rollbacks of the California Environmental Quality Act in state history in what is considered a win for developers. Under the budget-related housing bill, infill housing developments are no longer subject to the CEQA review and approval process.
That means that most urban developers will no longer be on the hook to study, predict and mitigate the ways that new housing developments might affect local traffic, air pollution, flora and fauna, noise levels, groundwater quality and objects of historic or archaeological significance.
Gov. Gavin Newsom called it “a budget that builds” after signing the budget plan to kick off the fiscal year.
California’s housing call for identifying spots for 2.5 million new homes by 2030.
“It proves what’s possible when we govern with urgency, with clarity, and with a belief in abundance over scarcity,” Newsom said in a statement. “I thank the many housing, labor and environmental leaders who heeded my call and came together around a common goal — to build more housing, faster and create strong affordable pathways for every Californian.”
It turns out, however, that rumors of the death of the witch that’s been making California developers miserable for decades might have been exaggerated, as the limited effects and rifts within the real estate industry come to light in the wake of CEQA reform.
San Francisco city government tops Q2 leasing list
In San Francisco, the biggest office lease transaction by square footage last quarter didn’t involve OpenAI or Uber but the city’s government.
The City and County of San Francisco expanded its presence at 1455 Market Street in South of Market to 225,883 square feet in the second quarter, up from 157,000 square feet last year, according to Savills’ second-quarter office market report. The city plans to use the newly leased space for offices of the city’s Human Services Agency, the Mayor’s Office of Disability, and the Office of the Treasurer and Tax Collector.
Local government was followed by LinkedIn, which renewed its lease at 222 2nd Street in SoMa and shrunk its footprint to 156,672 square feet. Other major recent leases in San Francisco include Coinbase’s deal for 150,671 square feet at 1090 Dr. Maya Angelou Lane in Mission Rock, and artificial intelligence-powered productivity startup Glean’s expansion from its Palo Alto headquarters into additional offices at 634 2nd Street in South Beach.
Berkeley strikes down nation’s oldest single-family zoning law
The same week California lawmakers and the governor significantly trimmed down the 55-year-old CEQA, the city of Berkeley similarly moved to abolish a nearly 110-year-old zoning law to pave the way for more housing.
Berkeley City Councilmembers unanimously voted to overturn a single-family zoning law dating back to 1916 — the nation’s oldest — that prevented denser development in much of the city’s urban core. Under the new law, developers will be allowed to build three-story buildings with up to eight units on a typical 5,000-square-foot lot.
Councilmember Rashi Kesarwani said the middle housing ordinance would is aimed at “”trying to create more starter-home opportunities for middle-class workers, for people of color, for people who have historically not had an opportunity to own a home and build multigenerational wealth.
“That is actually at the root of what I believe we are striving for with this entire ordinance,” Kesarwani said.
The City Council will consider the motion for final approval on July 8. If finalized, the changes will take effect Nov. 1.
Warren Buffett protégé continues Union Square buying streak
The legacy of the Toronto-based Reichmann global real estate dynasty is growing in San Francisco.
Ian Jacobs, a scion of the Olympia & York development empire and former Berkshire Hathaway investment researcher under Warren Buffett, purchased a 21,412-square-foot office building with ground-floor retail in Union Square. The property at 111 Ellis Street rises five stories with the ground floor formerly occupied by a Uniqlo store. It marks his second buy in the area in recent months.
The purchase comes after Jacobs raised $75 million as part of his “Project Uris” effort, which seeks to buy 3 million square feet of property in downtown San Francisco. Fittingly, the project is named after Uris Buildings Corporation, which sold a number of office buildings in New York City to the Reichmann family in the late 1970s. The buildings grew in value exponentially after an economic rebound.
In May, Jacobs bought an Art Deco retail building at 200-216 Powell Street for $7.4 million.
For San Francisco malls, it appears that when a new supreme starts to flower, the old supreme begins to fade.
The beleaguered San Francisco Centre mall, which has seen retailers flee in droves over the past two years, saw a 63.3 percent drop in foot traffic between 2019 and 2024, according to Placer data obtained by the San Francisco Business Times. In that same period, foot traffic at Stonestown Galleria rose 25.9 percent.
Nordstrom shuttered its San Francisco stores in 2023, including its San Francisco Centre flagship, while another anchor tenant, Bloomingdale’s, moved out in April. Zara, Steve Madden, and other retailers have rushed for the doors at the Market Street mall in recent months. The shopping center is between 70 and 80 percent vacant, down from 96 percent occupancy in 2016.
Meanwhile, at the Stonestown Galleria on the city’s outskirts, anchor tenants like Regal Cinemas, Whole Foods Market, Trader Joe’s and Target are joined by new restaurants and other experiential attractions like mega-arcade Round 1 and the soon-to-come virtual reality venue LivePlay Collective by Fever.
— Chris Malone Méndez
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