Tall & Urban News

Chinese developer Oceanwide Holdings suspended construction on a 605-foot (184-meter) tower in San Francisco’s Transbay district, one of the city’s largest projects, as it grapples with rising construction costs.

The Beijing company said Wednesday that work has stopped indefinitely on the shorter Tower 2 at its Oceanwide Center project. Oceanwide is studying ways to lower construction costs to resume work. The stalled tower at 512 Mission Street includes 156 condos and a Waldorf-Astoria hotel.

Construction is continuing on a 910-foot (277-meter) office and condo tower that is set to open in mid-2023—about two years later than earlier estimates.

“In light of local market changes and economic uncertainties, Oceanwide has determined that a realignment of the work scope on the Oceanwide Center project is necessary to keep the project sustainable,” the company said in a statement.

Oceanwide Center is a high-profile example of how spiking costs are threatening the Bay Area’s building boom. A construction labor shortage and new US tariffs on building materials have exacerbated already high costs. San Francisco is the world’s most expensive place to build, according to a survey by consulting firm Turner & Townsend. Delayed and canceled projects reduce the supply of housing and office space, potentially pushing up already record-high rents.

Oceanwide has been seeking additional financing for the project and declined to disclose the project’s total budget, or how much it has invested to date. An estimated budget of $1.6 billion was reported earlier this year.

Oceanwide bought the project site for $296 million in 2015. Construction began in late 2016.

At the same time, funding US real estate projects became more difficult for Chinese companies after the Chinese government imposed capital restrictions on moving money out of the country, said Darlene Chiu Bryant, an executive director of GlobalSF, a nonprofit that works with international investors.

Chinese firms such as Greenland and Anbang have been forced to sell US properties as a result, she said. Another Chinese developer, Z&L Properties, has had numerous project delays and lawsuits in San Francisco.

Oceanwide has never completed a project in San Francisco, and made the atypical move of managing one of the largest developments in city history without a local partner. Other Chinese companies, such as Vanke, Gemdale and SRE Group, have partnered with American developers and appear to have more successful projects, said Bryant.

“I typically tell Chinese investors to work with a local partner,” she said.

It isn’t the first time Oceanwide has stopped work. In February, construction stopped on its Los Angeles project, Oceanwide Plaza. Work has since resumed.

For more on this story go to The San Francisco Chronicle.