{"id":492723,"date":"2026-10-11T15:46:19","date_gmt":"2026-10-11T15:46:19","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ca\/492723\/"},"modified":"2026-10-11T15:46:19","modified_gmt":"2026-10-11T15:46:19","slug":"inside-san-franciscos-office-cap-how-a-1980s-law-is-threatening-new-development","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ca\/492723\/","title":{"rendered":"Inside San Francisco\u2019s office cap: How a 1980s law is threatening new development"},"content":{"rendered":"

\"\"<\/a> Lincoln Property Company’s Brandon Wang and McCourt Partners’ Jordan Lang with rendering of development at 536 Mission (Lincoln Property Company, McCourt Partners, Getty) <\/p>\n

With record leasing<\/a>, surging rents and investor interest<\/a>, it appeared like nothing could stop the momentum San Francisco’s office market is seeing. Well, except maybe a law passed more than 40 years ago. <\/p>\n

San Francisco’s Office Development Annual Limitation Program caps the square footage that can be allocated to new office developments in the city. While other major U.S. markets often implement zoning and height restrictions to shape commercial growth, San Francisco appears to be the only metro with limits down to the square foot. <\/p>\n

CBRE’s Colin Yasukochi said 2026 is on track to break the city’s previous record for leases over 100,000 square feet. With 20 already closed and nine pending, leasing at this scale is expected to exceed 2018’s record by 1.1 million square feet. <\/p>\n

“That’s always an indication of new development potential,” Yasukochi said of the number of six-figure leases this year. “It’s usually when tenants get really large and they want a full building to themselves that new development tends to be their best option.” <\/p>\n

Yasukochi anticipates a wave of new construction will hit next year, particularly in downtown and Mission Bay. With that renewed demand, developers will have to fight for the limited space bound by San Francisco’s program. <\/p>\n

This has already created a roadblock for a proposal from a joint venture between Los Angeles-based McCourt Partners and Dallas-based Lincoln Property Company for a downtown office tower development that would bankrupt the city’s available development square footage. <\/p>\n

But let’s back up. <\/p>\n

In 1985, voters approved the initial version of the limitation program, which “aims to ensure a manageable rate of new development and to guard against typical ‘boom and bust’ cycles,” according to the San Francisco Planning Department’s website. <\/p>\n

The program used to allocate 950,000 square feet (75,000 of which was designated for smaller projects under 50,000-square-feet) annually for new office construction, but it was amended in 2020. Now, that allotment is tied to affordable housing production, which has shrunk the square footage provided each year significantly, as the city is far behind on its building goals. <\/p>\n

What’s held the program afloat has been its rollover policy, where unused square footage from a given year carries over to the next. Post-pandemic, as San Francisco’s office market struggled<\/a>, demand wasn’t really there for new office, so the development allocation pool filled up. <\/p>\n

As of late June, the San Francisco Planning Commission had a little over 813,000 square feet for large developments for the year, despite the latest annual addition being less than 200,000 square feet. That number came from Sarah Dennis Phillips, director of San Francisco’s Planning Department, who said during a September Planning Commission meeting, that the next allocation will probably be around 150,000 square feet. <\/p>\n

While banking the square feet from previous years helped boost development potential, it’s not enough to meet the number of projects in the pipeline \u2014 or even one, depending on the project. <\/p>\n

The McCourt-Lincoln JV has secured entitlements for its 536 Mission Street development which will rise at the Golden Gate University’s longtime downtown San Francisco campus, following a $31.6 million acquisition<\/a> by Lincoln. The developers submitted two applications, one for an office tower and one for a mixed-use tower \u2014 both of which received approval. <\/p>\n

The JV’s preferred iteration is the first which would stand 752 feet tall and include nearly 1.4 million square feet of trophy office space, plus 4,000 square feet of ground-floor retail. The second would host 643,500 square feet of office space, 385 residential units and about 4,400 square feet of retail. <\/p>\n

Despite securing entitlements for both plans, the Planning Commission only signed off allocating new development square footage for the mixed-use plan. <\/p>\n

“If the full allocation was granted here, that would be all the allocation that we have,” Phillips said. “So other projects in the pipeline\u2026 would not be able to move forward until we have significant changes to our [allocation] pipeline.” <\/p>\n

In order to increase the amount of office that can be developed, the city would either need to dramatically up its affordable housing production or bring forth a measure to voters to amend the existing law. <\/p>\n

The issue with the JV’s mixed-use project proposal is that it “doesn’t pencil today,” Brandon Wang, who oversees Lincoln Property Company’s northern California region, said during the September commission meeting. But with higher rents for office and lower development costs versus housing units, a full office version of the project is feasible, he said. <\/p>\n

Despite not receiving the allocation they were after, Wang’s not ready to throw in the towel. <\/p>\n

“It’s on the top of the priority list for the city to figure out how to accommodate future development,” Wang told The Real Deal. “There’s a path\u2026 and it’s about working collaboratively with the city to figure out how the projects move forward.” <\/p>\n

Read more <\/p>\n

This article originally appeared on The Real Deal. Click here<\/a> to read the full story. <\/p>\n","protected":false},"excerpt":{"rendered":"Lincoln Property Company’s Brandon Wang and McCourt Partners’ Jordan Lang with rendering of development at 536 Mission (Lincoln…\n","protected":false},"author":2,"featured_media":492724,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[37356,387,3887,383,9180,16281,3127,37357,9472,16282,31007,37358,15630,37359,388,8523,101,103,102,104,106,105,7037,16283,16284,17075,37360,1747,37361],"class_list":["post-492723","post","type-post","status-publish","format-standard","has-post-thumbnail","category-san-francisco","tag-401k","tag-business","tag-business-news","tag-economy","tag-finance","tag-financial-information","tag-investing","tag-investment-tools","tag-investor","tag-market-news","tag-mortgage","tag-mutual-funds","tag-personal-finance","tag-quote","tag-real-estate","tag-retirement","tag-san-francisco","tag-san-francisco-headlines","tag-san-francisco-news","tag-sf","tag-sf-headlines","tag-sf-news","tag-stock","tag-stock-research","tag-stock-valuation","tag-stocks","tag-suze-orman","tag-tax","tag-track-portfolio"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/492723","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=492723"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/492723\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/492724"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=492723"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=492723"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=492723"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}