Starboard Commercial Real Estate

Hans Hansson | May 16, 2011

Under new zoning (called the "Eastern Neighborhoods Rezoning") effective January 19, 2009, the Board of Supervisors has created a number of new areas in the eastern side of the City which can now be used only for activities called "production, distribution, and repair" ("PDR"). Formerly, these districts (East SOMA, the Mission, Showplace Square/Potrero Hill, and the Central Waterfront districts (mostly "M" zoning districts), contained the most permissive zoning, allowing a mixture of PDR, housing, office, and retail.

Almost 1,000 lots zoned M-1, a zoning which allowed a wide assortment of uses including residential, office and retail, have been rezoned to industrial only (PDR).

The rezoning has lead to a process to legalize office, retail or residential space in areas that no longer allow such uses. The only use one cannot legalize is live work space without benefit of permits.

Many alteration permits showing "office" as a use may be challenged by those political groups who want the Eastern Neighborhoods to become mostly industrial. This is because most owners and tenants left the submittal of alteration permits to contractors, who may have filled in the "proposed use" box in an alteration permit in a wrong way. Also, in the dot-com boom, the immediate needs for office space were so intense that owners may have placed tenants in spaces without going through the lengthy San Francisco permit approval processes.


The rezoning has made existing office uses in PDR districts into either "legal" nonconforming ones or "illegal" non-conforming ones. Illegal ones are those without Building Department (and Planning Departments) permits which explicitly call out the use as office. Notices have gone out to 7,000 owners telling them this. If the uses are illegal, enforcement by the Planning Department will commence January 19, 2012. Those that are legal may continue indefinitely as long as (1) the alteration permits by which they moved in indicate on them that the proposed use is "office" (2) there is no physical expansion or intensity of use, (3) there is no period of office vacancy for three or more years, and (4) there is no change of office use to a PDR use at any future time. There is a retroactive legalization process discussed below.


If an occupant of a space has moved in without benefit of permits and has been in the space for more than two years as of January 19, 2009, the occupant or owner will have three years (starting January 19, 2009) to legalize by paying a fee of between $10.50 and $12.50 per square foot (and an additional $1 per square foot for child care where 50,000 sf or more is being legalized). Any City determination to allow legalization (or not) can be appealed to the Board of Appeals.


If for certain reasons a particular space cannot be legalized (for example, the user of the space has moved in within the past two years), new office tenants or the continuation of existing ones is still possible. If one has a combination of PDR space and office space, where the PDR space is at least 1/3 of the tenant space, one can have 2/3 office space. This is known as an Integrated PDR Space ("IPDR Space"). For very small spaces, even a lesser percentage of the square footage must be PDR. The City has decided to allow this for only a limited number of building types, and may extend it to other buildings once the City determines the success of this. The creation of IPDR space will trigger a fee much lower than the legitimization fee, but it may be forgiven under certain circumstances.

Should you have any questions on this, please feel free to contact Brett Gladstone Esq. or Susanne Kelly Esq. at (415) 434-9500.

Starboard TCN is posting this article on its websites and blog with the approval of Brett Gladstone Esq.

This is a periodic newsletter from the law firm of Gladstone & Associates, San Francisco, a real estate transactions and land use firm providing commentary on new land use trends in San Francisco.
Posted 8 years, 4 months ago on May 16, 2011
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