According to a report from Grubb & Ellis, the San Francisco office leasing market is showing signs of stabilization in the central business district, but the area south of Market Street has vacancy rates of more than 20%. Despite this news, at least three large projects are slated for the Potrero Hill area between the Mission District and the Bay.

Construction is underway at 350 Rhode Island St., a 260,000-sf office project by Stein Kingsley Investments. The site is a full city block in the heart of the South of Market sector. The project consists of two inter-connected, four-story buildings with two levels of parking.

SKS is also planning a 145,000-sf building at 2101 Bryant St. The project, known as Bryant Square, is coming under some criticism from neighbors who claim it will displace blue-collar workers and artists. SKS is noted for conversions of warehouses and factories including a former garment factory at 17th and Harrison streets.

Completion of the 300,000 sf MacroMedia headquarters at 450 Rhode Island St. is not expected until mid-2003. Developers have not yet begun construction, but have torn down the existing industrial buildings on the site.

According to the Grubb & Ellis report market conditions in the central business district should start to stabilize in the next two quarters. Completion of new construction and additional sublease space can lead to high vacancy and further decline in lease rents, but the effects are likely to hit the South of Market area hardest. The downturn there could be prolonged, the report states, due to excess supply and no clear source for replacement demand.

Instant Insights /

Despite Market, Developers Dig Into Potrero Hill

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