The San Francisco Planning Department approved Hudson Pacific Properties’ application to convert a 115-year-old building at 901 Market St. into 136 housing units as the city pushes for more conversions.

HPP submitted its application in July, meaning the approval process took just four months, the San Francisco Business Times reported. The company purchased the 212K SF office and retail building in 2012 for $90M.

The building is near the shuttered San Francisco Centre mall and San Francisco’s Ikea store in the Mid-Market submarket. 

Despite the city’s strong need for new housing units and an abundance of older, vacant office product, office-to-residential conversions have been virtually nonexistent in San Francisco due to difficult permitting procedures and high construction and financing costs.

The city in February initiated three different financial incentives, including waivers for inclusionary housing requirements and some taxes. Perhaps most enticing is the 30-year waiver of local property taxes above the developer’s baseline entry in a property. 

The efforts seem to be paying off, Leigh Lutenski, director of joint development for the city of San Francisco’s Office of Economic and Workforce Development, said at a Bisnow event last month.

“We have four applications into the city for conversions, and our staff is fielding multiple calls a week about new interest,” Lutenski said. “We're finally seeing people looking seriously at conversions.”

Other conversion projects are in the works, including Emerald Fund’s plans to redevelop a vacant six-story building at 150 Hayes St. into 104 apartments. All-in development costs for the conversion are expected to be around $600K per door, according to Emerald Fund founder Oz Erickson. 

“It’ll be a very successful project, and I hope that it will serve as the catalyst for other people thinking that they can do office-to-residential conversions,” he said at the September event.

Emerald Fund completed the city’s largest office-to-residential project in 2015 along with National Real Estate Advisors, with the conversion of a former 470K SF, 29-story skyscraper at 100 Van Ness Ave. into 418 residential units that cost about $550K per unit.

The conversion is also one of a few in the works for HPP, which is working to reduce its office footprint, selling two other San Francisco properties last month for $65.5M.

HPP also amended documentation at its Metro Center campus in Foster City and various properties it owns in Redwood Shores to permit residential use, CEO Mark Lammas said on his company’s second-quarter earnings call. Metro Center features a 403K SF, 21-story Class-A office tower, along with 145K SF and 143K SF Class-B office buildings at 919 and 989 Hillsdale Blvd.

The changes give HPP the flexibility to explore residential and mixed-use development among those assets, Lammas added.

“This isn't a reaction to soft leasing demand as we’re seeing healthy interest in these locations,” he said in August. “Rather a proactive step to unlock value by tapping into strong residential demand independent of where the office leasing cycle stands.”

In Southern California, HPP plans to convert the former headquarters of the NFL at 10950 Washington Blvd. in Culver City into 508 apartments.