New office building in San Mateo moving ahead amid tough market

Situated near the downtown Caltrain station, the project would be well-suited for commuters and nearby residents, commissioners and several public commenters noted.

But Commissioner John Ebneter raised alarm over an increasing number of commercial projects that will offer working space without the commensurate housing needed to sustain future economic growth.

“It’s extremely difficult for me to continue to see projects that make this imbalance more acute and put more pressure on people who are paying rent,” he said. “The more jobs we have here without creating an equal amount of needed housing keeps extreme pressure on people who struggle daily just to get by, and their basic expense is their rent.”

Demand for new office development has, in some cases, been met with skepticism, given the commercial real estate market still sees stubbornly high vacancy rates. But because multiunit residential housing generally sees lower profit margins and can be harder to pencil, commercial spaces still retain a financing advantage, despite an overall tough lending climate as of late.

Preston O’Connell, partner at Harvest Properties, the project’s developer, added that a large percentage of office vacancies are concentrated in older, and thus less attractive, building stock.

“In the post-COVID world, the spaces that people are really looking for are like this project — where they’re near transit, they have been built with the idea of bringing people back into the office and collaborating, they’re near retail,” O’Connell said. “Projects that have been built with that type of orientation have actually done pretty well. … The buildings that have really struggled are in locations that don’t have those kinds of qualities.”

Out of all the city’s approved developments that are not yet under construction, the South B Street project is one of the only exclusively office developments, with most either mixed-use or residential uses — though Ebneter said there is still a disparity between the sheer amount of office versus housing built.

“Between 2023 and 2024, when we were concentrating very hard on putting plans together to make sure we had a balance of jobs and homes in the city, and specifically in downtown, we built 274,000 square feet of office space,” he said. “When in fact, we built only 122 residences in 2023.”

But the city’s housing supply and affordability crisis is better addressed through policy efforts and is largely influenced by factors outside the commission’s control, Commissioner Adam Nugent said.

“The jobs and home imbalance in our region and in our city is dire. It is a severe problem,” he added. “However, to me, this is not the forum to litigate that. As we develop general plans, we develop more specific designations and requirements in our future zoning codes. That’s where we can address that sort of thing.”

The project’s site plan and architectural review was approved 4-1 by the commission.