Just as the fictional Star Wars spaceship snuffed out the inhabitants of the planet Alderaan, this real-life Death Star -- likewise conjured by filmmaker George Lucas -- will be poised to extinguish the life force from San Francisco. Perched fortresslike on a Presidio hillside, it will contribute to the banishment of artists' cooperatives, dance troupes, community groups, and hundreds of other nonprofit and cultural organizations that describe this city's mortal soul.
Thanks to an untoward combination of San Francisco political and economic phenomena -- call it a disturbance in The Force -- the creation of Lucas' Letterman Digital Center at the old Presidio Army hospital may indirectly help drive San Francisco commercial rents so high that only dot-com companies, financial service providers, and other huge-money businesses will remain. Because of peculiarities in a 1980s no-growth measure called Proposition M, the 900,000-square-foot Lucasfilm campus will swallow almost an entire year's worth of the office development allowed to take place in San Francisco. Unless this trajectory is altered, the Death Star will foment in the city's commercial real estate market the sort of severe basic-good scarcity one normally associates with famines or global warfare. Commercial rents will rise without limit. Organizations that can't afford astronomical rents -- ordinary businesses, nonprofits, cultural foundations, artists' cooperatives -- will flee. The city will become a banking-and-high-tech wasteland, a cultural asteroid belt.
This will all come to pass unless the members of the resistance -- artists, advocates for the poor, progressive activists of every stripe -- learn to harness the good side of The Force.
While it hasn't been inscribed in history books yet, the tale of San Francisco's commercial real estate market during the past two years is sure to be passed down for generations. Word downtown holds that the recent run-up in S.F. commercial rents may be the greatest such escalation in U.S. history. South of Market warehouses that could be rented for as little as 50 cents per square foot per month two years ago now go for around $7 per square foot. Space that was going for around $45 per square foot per year last September is going for $75 to $80 per square foot today. And leases being inked now will drive prices even higher.
However one feels about the long-term viability of our dot-com boom, this trend will not abate any time soon. Last year, venture capital firms were dumping cash into the Bay Area at the rate of $100 million per day. This year, it's $150 million per day.
So dozens and hundreds and thousands of well-financed digital-technology firms are bidding up space anywhere they can. They're turning live-work spaces into offices. They're turning old warehouses into offices. But mostly, they're turning the offices of other people -- people who don't have as much money as they do -- into dot-com offices.
If this were any other spot in the universe, the problem might be addressed by simply building more office space to satiate the exploding demand. As new buildings came on the market, prices would stabilize, and vacancies would go from the current near-zero percent to the more manageable 10 percent SOMA enjoyed a year ago. Low-to-mid-margin businesses, nonprofit organizations, and arts groups would renew their leases. San Francisco would remain culturally vibrant.
Instead, we have Proposition M, the measure that was the most stringent anti-growth law in the country when voters approved it in 1986.
Proposition M is remembered with tones that elsewhere might be reserved for the birthday of Carlos Fonseca, or the Haymarket Riot. Its passage 14 years ago represents the one instance where San Francisco "progressives" got a chance to feel like they had really, really stuck it to The Man. It was a symbolic vanquishing of imperialist developers and their imperialist political cronies. It represented the culmination of efforts by Bruce Brugmann, whose left-organ Bay Guardian endlessly republished articles denouncing "Manhattanization," and homelessness entrepreneur Randy Shaw, who claims to have been the Svengali behind the Guardian articles. It's the crowning lifetime achievement of anti-live-work-loft lawyer Sue Hestor.
For a certain San Francisco, Proposition M is The Force.
But just as in a certain fantasy sci-fi movie, The Force serves only those who learn to harness its power, and it can be used for evil, as well as for good.
Proposition M is, simply put, a growth cap. San Francisco developers may build no more than 950,000 square feet in large office buildings per year. If there are permit applications to build more than that, developers are forced to compete for permission to build in a "beauty contest," with city officials picking the buildings they deem best for the city.
During the years following Proposition M's passage, recession-era construction was so depressed that construction permits accumulated in a backlog that, by last October, totaled 3.5 million square feet.
But last year, as San Francisco became dot-com Valhalla, demand for work space exploded. When the Proposition M space allotments became available for approval Oct. 17, 1999, the Planning Commission building turned into an old-fashioned land office. By May of this year, all of the 3.5 million square feet of backlogged permits had been awarded, leaving developers wishing to build another 2 million square feet hanging.
Now, demand for space is so acute that dozens of developers have proposals in the works. As of this writing there are seven large ones hoping for approval, including an addition to China Basin Landing in the South of Market, a rehab of the old Armory building in the Mission, and Ron Kaufman's Macromedia building on Rhode Island Street in Potrero Hill.
According to some estimates, there now exists demand for around 4 million feet more space than what has already been approved.