Matt Smith

In a Galaxy Far Too Close to Home

Sitting on a park bench outside the Presidio YMCA, gazing a couple of years forward into the evening sky, one can see the twinkle of a Death Star.

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. [page]

But it is possible that none of these projects — nor any others developers may conceive — will see the light of day for the next half-decade.

The Death Star won't let them.

There's a staggering problem with Proposition M: New buildings over which the city has no control still count toward the growth limit.

Therefore, Lucas can build his digital media complex in the Presidio — without city permission — because it's on federal property. But the square footage counts toward the Prop. M cap because it's inside city limits, meaning Lucas jumps to the front of the line and the city, by law, must put the brakes on other proposed development.

There are other examples. State and federal office buildings — 1,100,000 square feet of which are planned for downtown San Francisco — also count toward the cap, even though the city has no right to control their construction. Because of the way Proposition M is written, these projects become like a black hole, sucking all the allowable building permits from other projects, driving up rents citywide, forcing nonprofits and other less endowed tenants to flee.

For organizations devoted to the arts, and the city's hundreds of nonprofit groups, the situation is dire.

The San Francisco Arts Commission, for its part, is now conducting a study of arts groups displaced by escalating rents. The results have yet to be tallied, but the writing's on the wall. The commission recently invited representatives of displaced arts groups to a Friday meeting to share horror stories. It expected a few dozen. It got hundreds, says Arts Commission Director Rich Newirth.

Beleaguered in the best of times, modern dance has been among the groups hardest hit. Local luminaries such as Alonzo King and Joe Goode have found their muse snuffed by something as banal as a distorted real estate market.

“These are very, very important organizations in the ecosystem of San Francisco's arts,” Newirth told me. “They are the larger, midsized organizations that have national reputations, that tour nationally. The whole threat to losing them to another city would be really significant, very substantial, and impact the artistic reputation of the city.”

Dance is only the beginning. In the past couple of months artists have banded together into interest groups hoping to stave off the city's real estate meltdown.

The Bayview Bank building at 22nd and Mission, for example, until now a veritable warren of nonprofit and arts groups, has seen residents scatter as new, higher-paying tenants have moved in.

Others have formed a group called the Mission Anti-Displacement Coalition. “With real estate going up you're seeing the eviction of small businesses and nonprofits,” says Geri Almanza, with the Latino community organization group Poder.

Eric Quesada, of the nonprofit Mission Housing Development Corp., has also been working with the Anti-Displacement Coalition. “From a gut level, there's a human cost to the change that's happening to the city,” he says.

In a different galaxy, far, far — far — away, all these groups might be banding together to vanquish Proposition M. They might be holding brainstorming parties on how to draft a ballot measure that would provide for enough new S.F. commercial space to relieve pressure on all tenants, including nonprofit groups, arts organizations, and others.

But in this star system, they seem to be doing just the opposite.

In San Francisco, anti-growth sentiment is cherished more as a religion than as a practical approach to civic problems. And reverence to the legacy of Proposition M is the most powerful spiritual gesture a San Francisco progressive can perform.

The Mission Anti-Displacement Coalition, for one, is focusing efforts on fighting the development of digital-technology office buildings in the Mission District. The logic goes something like this: New office buildings drive up prices, causing neighborhoods to “gentrify.” So the best way to battle spiraling rents is to battle new buildings.

“The new businesses are increasing the property values,” is how Geri Almanza puts it.

The construction of more commercial space is driving up prices?


So an increase in supply is driving up prices?

“Yeah …. Well, maybe you should talk to somebody else.”

Which is pretty much how all such conversations end.

There exists a bedrock belief — ill examined, perhaps, but bedrock just the same — that it's not scarcity that drives up prices in San Francisco, it's “The Market.” And “The Market” is “The Corporations,” and “The Corporations” are the Dark Side of The Force.

In this universe, San Francisco can be saved by creating narrowly defined industrial zones, thereby shutting the big-money businesses out of large areas of the city. Proposition M caps will shut out the rest. Neighborhood groups will prevent housing from being built, so dot-com yuppies are kept at bay. San Francisco can be saved by telling people where they can live, where they can work, and, most important, where they can't do either.

But as George Lucas dreamed a score ago, The Force is, at its most elemental, neither dark nor light. It is available to all of us. And whether we stumble or prevail depends on how well we harness it, and on how cunningly we yield to its power. In Lucas' fantasy, rebel seers holed up on the fourth moon of the planet Yavin managed to detect a critical weakness in Darth Vader's Death Star. Similarly, Knights of San Francisco Progressivism would do well to press their ears to the downtown Financial District, seeking out chinks in enemy armor.

As I write, business-friendly nonprofit groups such as the San Francisco Planning and Urban Research Association, the San Francisco Partnership, the San Francisco Chamber of Commerce, and other commerce and real estate groups are drafting proposals for a possible ballot measure that would derail Proposition M.

Schemes — all devised in one way or another to partly appease progressive groups — include “borrowing” approved space from future years, based on the notion that the permits won't be needed during the next economic downturn. One plan would exclude from Proposition M jurisdiction the Presidio and government office buildings. Another idea would raise the M limits in exchange for tight zoning restrictions eliminating commercial development from areas such as the Mission. Some have suggested requiring developers to set aside 10 percent of buildings for nonprofit groups, who would pay 50 percent of market rate. Other proposals would increase the $15 per square foot “exaction” large-scale developers are required to contribute under Proposition M to a low-income housing fund. The figure $25 per square foot has been bandied about. [page]

These groups have “included progressive voices” in these discussions, but this has largely involved letting the cynical Calvin Welch, and the more cynical Sue Hestor, blow air.

A familiar process, to be sure.

But the Dark Side has a fatal weakness. There's an open secret downtown that hasn't been mentioned in public much, and it's this: Big-time office developers seem to be willing to consider $25 per square foot exactions as a starting point. Rents are so high right now, profit margins so wide, that they could cough up more than that. In ordinary galaxies encountering ordinary negotiating situations, this $25 figure would be thus known as the “starting point” for future negotiations.

Ergo: Like no other time in history, progressives in San Francisco have corporate America by the balls. As any fighter — Jedi or otherwise — knows, there are two ways to go when you have your enemy by the balls. One is to keep tightening your grip. The other is to demand your enemy's wallet, watch, and shoes.

Progressives now find themselves in the position to exact more than $25 per square foot from developers. They can probably get their half-price nonprofit space and a few other sundry concessions thrown in for good measure. Why not bluff high and see what happens? While we're at it, why don't San Francisco's real progressives, the artists, the altruists devoting their lives to nonprofit causes, the Eric Quesadas and Geri Almanzas of the world, unseat the cynical blowhards, the Randy Shaws, the Sue Hestors, the Calvin Welches?

Rather than entering battle with the cry “Proposition M” on their lips, how about “Keep Your Eyes on the Prize”? How about allowing developers to build the space businesses need, thus taking the pressure off commercial rents for everybody? But at the same time, use this unique opportunity to make them finance a low-income housing boom, a nonprofit renaissance, a recultivation of San Francisco's soul.

A low-ball $30 per square foot in exactions, multiplied by the current 4 million square feet in excess commercial-space demand, is $120 million. A high-ball $40 — that's $160 million.

As seed money for low-interest housing loans, apartment development, or any other market-savvy approach the city wishes to consider, that's a lot of places for San Franciscans to live.

Sure, these residents, some of whom will likely be artists, or employees of nonprofits, will still spot Lucas' Death Star now and then if they happen to venture into the Presidio. But with its rent-goosing capacity neutralized, it'll be a fairly pleasant place, really. As planned it will surround a Great Meadow cloven by a creek, which will pour into a lagoon, which will be bordered by a tastefully appointed coffee bar. Banal, sure. But harmless, if drained of its destructive Force.

Matt Smith can be reached at SF Weekly, 185 Berry, Suite 3800, San Francisco, CA 94107.

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