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October 27, 2014

Lake Merritt BART plan may spur 4,900 housing units, ease development

San Francisco Business Times

Cory Weinberg

The neighborhoods that surround the Lake Merritt BART station are full of contradictions.

The transit hub is ringed by popular destinations like the Oakland Museum of California, Laney College and the newly beautified lake that's attracted swarms of new renters to the city. But almost all buildings are low to the ground, the Kaiser Convention Center sits idle and there is poor pedestrian connections from the station to the lake. Meanwhile, businesses in the Chinatown neighborhood struggle and little commercial development has taken root.

"It was sort of like the hole in the donut," said Pat Kernighan, an Oakland City Council member who represents the district. "It seemed like a void, but has the potential to have a lot of things happening there given the cultural institutions and BART."

Kernighan and other council members will decide next month an a redevelopment plan that city planners and neighborhood business leaders say will plot an easier path for the area to draw more investors, jobs and residents. Over the next 25 years, the plan aims to help generate 4,900 new housing units and add 1.23 million square feet of new office space - doubling the residential population and increasing the number of jobs by a quarter.

City Council approval would be the final act of a four-year marathon of community meetings, where most dissent has revolved around setting firmer height limits and how to ensure that new market-rate development doesn't push out current residents. The area, about a half-mile radius around the BART station, has a median household income of $27,800 - 44 percent less than the city's overall median.

"People want new businesses, new buildings, new housing, but they want the residents to be able to stay there and not be forced out because of raising rents," Kernighan said. "It's what everybody's grappling with." The final draft of the plan that the City Council's community and economic development committee will review this week mostly punts on the issue of affordable housing. Rachel Flynn, director of the planning and building department, said policymakers will soon tackle the issue citywide, contracting consultants to study whether impact fees funding affordable housing would discourage development.

Kernighan said she would likely endorse the staff's plan and that the city as a whole should study how to tie affordable housing benefits to new development.

For the Lake Merritt area, a plan alone doesn't make more development happen. But David Wientjes, first vice president at the brokerage Kidder Mathews, said it helps that the plan comes with new environmental approvals and certainty over height limits.

Flynn said these plans have weight: immediately developers became more interested in the area around Broadway between Grand Avenue and Interstate 580 once the city finished that plan last summer.

Many of the sites around Lake Merritt and Chinatown include a 275-foot height limit, or about 25 stories - the size of an Oakland downtown skyscraper. Other areas near the lake or closer to existing residential sites have lower height limits. "It's some of the most flexible zoning I think in the Bay Area," Wientjes said. "(The height and density restrictions) are so loose that it really doesn't affect anything."

Kidder Mathews just started marketing the sale of one of the "opportunity sites" that the plan singles out at a full block on 12th and Webster Streets. Wientjes said the site could be almost anything - multi-family, office, hotel, student housing, senior housing or mixed-use.

"It's a catalyst site. Once this site is developed you'll see all the infill," he said.

Maybe. The consulting firm AECOM found that while it made economic sense for developers to build downtown because of sufficient asking rents, building near Lake Merritt and Chinatown was a tougher sell. Developers would see payoff for building near Lake Merritt only if there wasn't a rise in construction costs, while only modular construction made sense in Chinatown.

Potential new development above the Lake Merritt BART station hit the skids when the developer that contracted with the transit agency quit two years ago.

"I think the area has great promise, but it's one step behind the downtown and Jack London corridor," said Mike Ghielmetti, head of Oakland-based Signature Development Group. "The waterfront, downtown and Uptown are more proven markets and will probably develop faster."

The area is also dealing with widespread land banking, where property owners hold onto sites without major investments, said Ed Manasse, the city's strategic planning manager. The plan tries to incentivize those landowners with a "first-come, first-serve" right to build taller buildings, he added.

Any kind of new development will be welcome by Chinatown businesses, said Carl Chan, a longtime Oakland community leader. He said the district hasn't recovered from the financial crisis, and hasn't yet felt the positive effects of an improved business climate downtown.

He added that the area's Asian residents in particular have bought into the idea of dense transit-oriented development after watching their native countries build skyscrapers around transportation hubs.

"Businesses in Chinatown don't want to just be in survival mode. We want to expand and do well," he said.

For the full story, go to San Francisco Business Times.

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