Developer Group i aims to skirt the moribund San Francisco office market with the city’s first office-to-residential conversion since the pandemic.
After restoring the historic Warfield Building nearly a decade ago, the Taiwanese investor has filed preliminary plans to convert the top five floors into 34 apartments at 988 Market Street in Mid-Market, the San Francisco Business Times reported.
Group i restored the 42,000-square-foot building, which opened a century ago next to the Lowes Warfield theater, in 2013 for around $30 million, according to its website. Tenants have included such firms as Spotify, Match and Zendesk. In a bygone era, its penthouse served as the regional office of gangster Al Capone.
The company now wants to convert 25,000 square feet of offices inside the nine-story building into upper-story apartments, while retaining around 15,000 square feet for offices.
If approved, it would be the first conversion of a San Francisco office building into housing since the pandemic, San Francisco Planning Director Rich Hillis told the Business Journal.
Office landlords have eyed such conversions with growing interest in Mid-Market, where the office vacancy rate reached nearly 33 percent in the third quarter. But the cost and complexity of the conversions has made office owners pause until now.
The proposed Warfield conversion would cost an estimated $9 million.
Plans call for 27 market-rate and seven affordable apartments, with studio, one-, two- and three-bedroom units. Group i also intends to remodel part of the second floor into a gym for residents. No work will be done to the exterior of the building.
“We think it’s a good opportunity to try out a residential conversion,” Group i Principal Mark Shkolnikov told the Business Times. “We still have a long ways to go to figure out if it’s viable, but the first step is the preliminary application.”
An affiliate of Group i purchased the Warfield Building in 2012 for an undisclosed sum. After it restored the building and its Renaissance-Baroque ornamentation, it leased 100 percent of the building to companies such as Benchmark Capital, Spotify and Match.com, according to SFGate. The historic theater has different owners.
“It’s quite literally at the intersection of technology and music in San Francisco,” Mo Tracey of Spotify’s San Francisco office told the newspaper. “It has been fun to be there in the beginning to see the transformation taking shape in the building and immediately surrounding neighborhood.”
Then tech teetered, and the neighborhood grew edgy.
Spotify, drawn to Mid-Market during the early 2010s because of the so-called Twitter payroll tax break, moved out of the Warfield Building in 2018, reportedly over concerns for employee safety.
Zendesk was set to lease the seventh, eighth and ninth floors through next summer, according to regulatory filings, but listings indicate those three floors, plus the sixth, have been put up for sublease, according to the Business Times.
Any office-to-residential conversion would likely begin with the city’s older buildings, said Hillis, the city’s planning director.
“If we are going to see them, these are the types of buildings we’d expect to see initially — smaller floor plates, older building stock, Class B and C office space with operable windows,” Hillis said.
— Dana Bartholomew
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