What happened: More than 4,220 units of housing began construction in San Francisco in 2012 — following a year in which just 269 net units were added.



What it means: After years of underbuilding, new housing and commercial construction is booming in San Francisco. Years of work on neighborhood plans and rezoning are paying off as new construction targets transit-served areas and neighborhoods that support greater residential density.

Walk down Market Street from the Castro Street Station to Powell Street Station, and you will pass more than 20 construction sites. These include small projects like the 24-unit condo building at 376 Castro all the way up to the 273-unit Avalon Bay project at 55 Ninth Street. The multiphase Trinity Project, stretching between Mission and Market on 10th Street, will eventually have 1,900 units. Meanwhile, the old Furniture Mart on 10th Street is being rehabbed into more than a million square feet of commercial space, and the financial services company Square is preparing to move into a 250,000-square-foot space in the old Bank of America data warehouse at 1455 Market. And this continues on almost every block of Market Street, all the way to Powell Street.

But Market Street is only one way to view the bigger trend. Twenty-two tower cranes dot the city. By year’s end, there will be 26. Many of these cranes are for public projects rather than private development, yet these numbers are staggering by any historic standards. Local union halls’ out-of-work lists are empty, and some unions are even calling in workers from other parts of the country. Something that seemed impossible not long ago is happening in San Francisco: a construction boom. But how did it happen so fast? Weren’t we just in a recession? Is it as big as it seems? What does it all mean?

How Big Is This Boom Really?

In 2011, $3.4 billion was spent on new construction, both public and private, exceeding the average of the previous 10 years by a billion dollars and outstripping the previous peak in 2005. All anecdotal evidence points to 2012 being bigger still for new construction expenditures. [1]

Halfway into 2012, more than 4,200 residential units were under construction in San Francisco. For context, this is 20 times the number of units that were added in all of 2011. All 4,200 won’t be completed this year, but many will, marking the beginning of a remarkable upswing in new housing construction.

An additional 32,120 new residential units have been approved by the Planning Department, and applications for another 6,940 units have been filed for review. [2] Nearly half of these represent the fully entitled projects at Park Merced, Treasure Island and Bayview/Hunters Point/Candlestick, whose construction will span several development cycles, and many of the approved units will never be built. But if the underlying conditions for this building cycle continue, some of the backlog of approved projects will be able to move forward into construction.

The graph on the following page demonstrates how spikes in permitting activity are echoed by spikes in new construction three to five years later. The last major jump in permitting was in 2007, and we are just now seeing the construction of many projects that were issued building permits then. The past two years also saw an increase in permitting activity (1,203 in 2010 and 1,998 in 2011, up from a low of 742 in 2009). The year 2012 is on track to sustain the upward trajectory. If the current construction uptick echoes preceding increases in permitted units, we may be looking at an unprecedented number of new units being completed over the next few years.