Transbay District: Higher Densities and a New Transit-Oriented Neighborhood in Downtown San Francisco

The Transbay Transit Center—a new multimodal transit hub that includes a retail center and a 5.4-acre (2.2 ha) rooftop park—is under construction south of Market Street, San Francisco’s main commercial strip, which acts as a gateway to the city’s famous and well-developed Financial District to the north. As the city grapples with enormous pressures to provide more office space for its perpetually expanding technology sector and more housing for workers at all income levels, the new neighborhood forming around the transit center is poised to alleviate some of those pressures and bring energy, identity, and—most important—people to this previously nondescript area.

What was clear from a discussion at the 2015 ULI Fall Meeting in San Francisco among the key players working on this complex $4.5 billion project is that proximity to transit was what lured private development to this area. What many have dubbed the “Grand Central of the West” promises to create more than 125,000 jobs, 4,500 new housing units, and over 6 million square feet (557,000 sq m) of new commercial office space.

Much of what constitutes the 40-acre (16 ha) area known as the Transbay Center District are underused publicly owned parcels created in the aftermath of the 1989 Loma Prieta earthquake, which severely damaged the double-decker Embarcadero Freeway. The city voted to demolish the freeway and its ramps in 1991, freeing up several parcels of land, which initially received a mixed response from developers. The old Transbay Terminal, which has fallen into disrepair after the closure of the Transbay Rail Line in 1959, as well as other blighted properties continued to pose a public health and safety risk.

Now, however, Transbay’s prospects couldn’t be brighter. Nineteen projects are under development around the transit center, which is set to open in 2017. They include several boutique office buildings; residential towers, some of which will feature mixed-income housing; and mid-rise multifamily buildings that are 100 percent affordable. In addition to the retail space woven throughout the district, the center itself will offer 160,000 square feet (15,000 sq m) of retail space, more than that found in San Francisco’s Ferry Building or Grand Central Station in New York City.

The sheer volume of retail will be “a significant amenity for a new neighborhood emerging in this area,” said panelist Scott Boule, legislative affairs director and community outreach manager for the Transbay Joint Powers Authority (TJPA), the agency that is overseeing the project. Including the rooftop park, more than 11 acres (4.4 ha) of parks and open spaces are planned for the district, and the vision for the streets includes pedestrian-only areas, bicycle lanes, and wide sidewalks. “We’re transforming the streets and public realm in this area, which historically wasn’t designed for high-density development,” said panelist John Rahaim, San Francisco’s planning director.

“The companies that are growing the fastest—that are expanding the fastest—are looking for this kind of neighborhood,” said panelist Mike Grisso, senior vice president of development and land planning at Kilroy Realty, which has invested in several office properties in the Transbay Center District.

John Eudy, executive vice president at Essex Property Trust, an investor in several multifamily properties within Transbay, concurred. “Over the long term, this was a no-brainer,” he said, and transit-oriented development (TOD) was a primary attraction. “There was no question in our mind that being TOD-centric was the way to go. The [apartment] market is going urban, and it’s only going to get more urban.”

Eleven transit systems, including California High-Speed Rail, Caltrain, Bay Area Rapid Transit (BART), MUNI, and several bus lines that service the East Bay and North Bay, will converge at the center. Dedicated bus ramps that connect directly to the Bay Bridge will significantly increase capacity for transporting commuters to and from the East Bay, expected to grow to 50,000 daily trips from the current level of 35,000.

In addition, a 1.3-mile (2.1 km) underground extension for Caltrain, which provides service to the airport and Silicon Valley, will create a new northern terminus for the line, which currently ends at the Fourth and King Street station several blocks to the south of Transbay. Considered the second phase of the Transbay project, the downtown rail extension, or DTX, is expected to yield significant regional economic and environmental benefits by creating stronger and more affordable transportation links between jobs and housing throughout the Bay Area and by removing hundreds of thousands of vehicles from the road.

Securing funding for a project of this scale, though, has been and will continue to be a challenge, the panelists said. While revenue generated by land sales funds the construction of the transit center, the TJPA is struggling to control costs due to bids coming in high, the result of San Francisco’s hot construction market, the TJPA’s Boule said.

The statewide elimination of redevelopment agencies in 2012 also created a level of uncertainty for the project since the San Francisco Redevelopment Agency (now called the Office of Community Investment and Infrastructure) was a key player in the project and owner and asset manager of several parcels and properties in the area. Ultimately, the city successfully worked with state lawmakers to designate Transbay along with several other major redevelopment initiatives as “enforceable obligations” that would continue uninterrupted.

The good news is that property values in district are expected to soar. A study by Seifel Consulting estimates a $3.9 billion premium on existing and new development of private properties within a 0.75-mile (1.2 km) radius of the transit center.

When the transit district is built out, the city expects to have achieved its goal of creating a highly compact, dense, vertical, and sustainable neighborhood to absorb the growth the city is currently having difficulty managing.

“This creates the highest-density district in California and [on] the West Coast,” said Rahaim. The most prominent example of greater height that is being embraced by the city is the Salesforce Tower, a 1,000-foot (304 m) building that will be the tallest on the city’s skyline. Several 700- and 800-foot (213 and 243 m) buildings will be located in the district as well. In fact, building height was among the benefits that developers received in exchange for paying into a Mello-Roos Community Benefit District, a special, California-specific taxing district that Mayor Ed Lee approved earlier this year to fund improvements to the Transbay district.

To learn more, read previous Urban Land coverage of the Transbay Transit Center.

Read a full economic analysis of the Transbay Transit Center by Seifel Consulting.