Bay Area Developers Betting On Mixed-Use To Boost Downtown Recovery

As San Francisco moves beyond the postpandemic malaise of high office vacancies and low foot traffic in the surrounding neighborhoods, local developers are counting on mixed-use projects to drive momentum.

New projects and conversions, particularly in the city’s tepid downtown, are incorporating several different uses and community-centered spaces to leverage as many potential customer groups as possible, according to attendees at Bisnow’s Bay Area State of the Market, held June 24 at the InterContinental San Francisco.

“Every developer should be asking themselves all the time, ‘How do you serve your residents? How do you attract tenants, and how do you build culture?’” Associate Capital partner Tina Chang said.

Nationwide, mixed-use districts have lower office vacancies, at 18% on average, and higher rents than nonprime business districts in the same city, where vacancy sits at 22%, according to a 2024 CBRE report. 

Driving down office vacancy rates means driving up the number of people willing to return to the office in the first place. In the last two years, submarkets consisting of 35% to 65% office space have been twice as likely to see above-average RTO rates as those without, according to Avison Young.

San Francisco’s mixed-use-heavy SoMa has 31% office vacancy, versus 34% in the city writ large, according to CBRE.

The trend holds for visitation overall. From 2022 to 2024, visitation increased by 58% in mixed-use submarkets, according to Avison Young.

That means these neighborhoods have to deliver amenities to satisfy multiple demographics, including employees coming to work and full-time residents.

That goal is motivating the design and development of Power Station, a 29-acre mixed-use waterfront development in Dogpatch. Chang emphasized the importance of building upon the foundation of the existing culture of a neighborhood. Dogpatch is a healthcare hub, and Power Station has partnered with the University of California, San Francisco on a 300K SF, eight-story medical building on the site. 

It is about not only tapping into the industries in the neighborhood but also the community there. Chang’s team thought about who lives in the city and how the project can serve them. Prequel Park is meant to appeal to families.

“It is a decision that we made early on to create the soul and a sense of character that people crave,” Chang said. “Often, as soon as your kids turn school age, what do you do? You leave the city. We want to create a place where people can have their children play and you can enjoy a drink right on the water at the same time.”

To mitigate the gentrification concerns attendant in every large-scale development, Associate Capital included a 100% workforce housing component aimed at middle-income households making between 50% and 110% of the area median income.

“That is part of the middle class that is rapidly fleeing San Francisco and that we're trying desperately to keep here in order to keep our city running,” Chang said. 

Mission Rock, Tishman Speyer’s 28-acre waterfront development near Oracle Park, is founded on a similar philosophy. The residential and office spaces are all designed with fewer amenities inside the buildings to drive people outside and into communal spaces. The adjacent China Basin Park, just behind the Chase Center, hosts concerts and family-friendly programming for the community. 

Tishman's Jeremy Bachrach said Mission Rock was designed to fit into the fabric of the neighborhood as well, with pedestrian-oriented streets that line up with the existing street grid. 

“That makes it feel like a part of this urban fabric and not just some leftover parcel that you know was a parking lot for the last 30-plus years,” Bachrach said. 

The company turned to local businesses and restaurants as it looked to fill ground-floor retail space. 

“In our first phase, we did not want to partner with national brands, even though we have no restriction on formula retail,” Bachrach said, referring to an ordinance easing restrictions on those businesses passed in April.  

The same approach has worked well for Stonestown Galleria and Pier 70, said David Sternberg of Brookfield Properties.

Those projects also attracted local businesses. 

“Those are not market deals whatsoever, not even close, but it's all about an investment into what will be the greater good,” Sternberg said. 

Angela Wu, principal at 10 Design, said the value of integrating open space into San Francisco’s mixed-use projects is encouraging social interaction and civic involvement.

This all hinges on getting these kinds of projects approved on a timeline that doesn’t render them completely infeasible. 

The roadblocks that typically hold things up are starting to fall, with Mayor Daniel Lurie’s push to streamline permitting and Gov. Gavin Newsom’s California Environmental Quality Act reforms for infill urban development.

As the process becomes more efficient, developers can experiment with how to make projects that contribute to the community. 

“It's figuring out all the different ways that the community can interact with your project,” Bachrach said.