Development projects in the Bay Area are being delayed by a backlog in utility infrastructure work need to connect new projects to the grid and provide gas hook-ups.
Delays in utility work were cited by Los Angeles-based Kilroy Realty as the primary cause of a six-month delay on the second phase of its Oyster Point project, a 2.5M SF life science hub it is building on the waterfront in South San Francisco.
In an earnings call this month, Justin Smart, Kilroy's president, said the stabilization date for the second phase of the massive project-a benchmark that reflects when the project will achieve 95% occupancy a year after major construction ends-has been pushed back to the fourth quarter of 2025.
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The construction delay for the second phase of the project, which involves three buildings encompassing 900K SF, is adding about 6.5% to the project's overall cost, pushing the price tag for the mega-project up over $1B.
"The schedule for the project was affected by utilities that ran through the center of the project, pipes and conduits, full of gas, electric, power and telephone," Smart aid, during the call. "The utility companies are notoriously slow at the best of times, and despite scheduling for their work plus contingency, they took far longer."
A parking garage and amenities facilities that are planned to go on top of the utility pipes and conduits now will take longer to build, Smart added.
In March, Scott Weiner, a state senator who represents San Francisco, introduced legislation to resolve delays on grid interconnections for new and existing construction, aimed at Pacific Gas & Electric as well as other utilities.
"Californians can't afford to wait months or years to have new projects connected to the grid, especially during a housing crisis," Weiner said, in a statement introducing the bill. "PG&E and other utilities have caused increasingly extreme delays because they're unable to complete basic tasks in a timely manner."
"We need new homes yesterday, and these delays are increasing the cost of construction and preventing Californians from accessing urgently needed housing," the state senator added.
Weiner's bill, known as SB 83, requires investor-owned utilities (IOU) to complete interconnection work within eight weeks of notification by the project applicant of a completed project being certified for interconnection, or "green tagged" by local officials.
If an IOU fails to meet the timeline, the bill requires that they pay a penalty to the project applicant. It gives the California Public Utilities Commission (CPUC) until September 30, 2024, to set timelines for IOUs to complete the final stage of energization once a project is ready, enforceable via a financial penalty to be set by the CPUC.
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