The developer behind a a long-vacant Mid-Market shopping mall now wants to convert some of its upper floors to office space.
According to the San Francisco Chronicle, developer Cypress Equities has filed a preliminary application to convert two floors at 945 Market St. to office use, cutting the amount of retail space from 264,000 to 216,000 square feet.
The $150 million project, which was built on spec, was long seen as a crucial bridge between Mid-Market and Union Square. The hope was to encourage tourists and residents to walk from the city’s core shopping district to the site between Fifth and Sixth streets. But the reality is that the Mid-Market neighborhood has struggled to find and keep retail and restaurant tenants.
The debate about converting retail space to office has already popped in Union Square. Planner Claudine Asbagh told the Business Times in June that the city has received four applications to convert upper floors in Union Square retail properties to new uses, including office space. But officials were hesitant to allow the conversions, citing the loss of potential sales tax. Asbagh said Thursday that one of those applications, at 925 Market St., was approved in July.
Planners supported that conversion because the office space was on upper floors and “is well-served by existing and future public transit options” and the primary ground-floor retail tenant, a Melt restaurant, would remain.
Still buildings such as 222 Sutter St., former home of a massive Loehmann’s department store, have sat vacant as landlords struggle to find new retail tenants.
Asbagh said Thursday that 6×6 is in a less restrictive zoning area than Union Square so the office conversion wouldn’t be as big a stretch. She said the planning commission has formed a working group to guide its approach as the retail landscape shifts, but it hasn’t met yet.
Cypress CEO Chris Maguire told the Chronicle that the company is negotiating with several large retail tenants for the lower floors of the property, but he said the deals aren’t finalized. Cypress did not respond to request for comment.
Construction on the building shell has been complete for about a year. A number of housing projects and hotels are slated for the area, which may boost foot traffic that could support retail.
Because Cypress is seeking about 48,000 square feet of new office space, it will be competing for the city’s Prop M small allocation office approval. The law is a cap on the amount of office space that can be approved in the city each year, but there is far more space available for projects under 50,000 square feet compared to projects over 50,000 square feet, which have a separate cap. That disparity has led to multiple office proposals just under 50,000 square feet.