Kilroy Finds Path Forward on 2.2M SF Development in SoMA

Kilroy Realty has settled a legal dispute that held up a 2.2-million-square-foot office campus atop the former Flower Mart in Central South of Market.

The Los Angeles-based developer settled mutual lawsuits with more than a dozen small business owners over who owned a private dead end alley, which for years had held up the 6-acre project at 610-698 Brannan Street, the San Francisco Business Times reported.

The settlement, made official last month, will enable Kilroy to proceed with its plans to redevelop the Flower Mart at Brannan and 6th streets, while ensuring its neighbors retain their access, the court records say.

A new cost and timeline for the development is not known.

San Francisco is in the final stages of creating a Central SoMa plan to allow developers to add more homes to office development proposals, if they so choose, according to the Business Times.

In 2014, Kilroy bought the Flower Mart site for $70 million, with plans to build the 2.2-million-square-foot office campus with three buildings ranging from eight to 18 stories. The project was approved five years later.

After years of negotiations by the real estate investment trust, the city’s wholesale flower market uprooted itself late last year from its 66-year-old home in Central of South of Market to a new home created by Kilroy at 901 16th Street, on Potrero Hill.

Meanwhile, the San Francisco office market collapsed during a pandemic shift to remote work and Kilroy paused the redevelopment of the original collection of flower warehouses.

There was also an exchange of lawsuits over who owned its adjacent alley, considered key to both Kilroy and surrounding businesses. In total, Kilroy has spent $579 million on assembling a 6-acre development site.

Last fall, Kilroy CEO Angela Aman said the developer had no imminent plans to pivot away from building offices to replace the Flower Mart. The city’s office vacancy now stands at 36.6 percent, according to CBRE.

This year, she said during an earnings call that Kilroy was redesigning the project to enable it to deliver in phases, while evaluating what mix of uses would be best for the site.

Kilroy, founded in 1996 by John Kilroy Jr., has a real estate portfolio of 14 million square feet, including life sciences properties in the Bay Area, Seattle and San Diego, according to its website.

Last month, Kilroy opened the second phase of its 3-million-square-foot Oyster Point life sciences campus in South San Francisco, now drawing financial and tech firms.

— Dana Bartholomew