SECURITIES AND EXCHANGE COMMISSION 

               WASHINGTON, D.C.  20549

                      FORM 10-Q

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
    SECURITIES EXCHANGE ACT OF 1934


         For the quarterly period ended September 30,
1996

                         OR

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

            Commission File Number 1-8692

          PACIFIC GATEWAY PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)

               NEW YORK                     04-2816560    
    (State or other jurisdiction of   (IRS Employer
    incorporation or organization)               Identification No.)
         
 ONE RINCON CENTER, 101 SPEAR STREET, SUITE 215, SAN
FRANCISCO, CALIFORNIA 94105
(Address of principal executive offices)  (Zip Code)

Registrant's telephone number, including area code (415) 543-8600

                                Not Applicable                
                  
(Former name, former address and former fiscal year, if
changed since last report)

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes   X   No   

Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of September 30, 1996: 

$1.00 Par Value Common Stock              3,892,596        
   (Title of Class)          (Number of Shares Outstanding)     


           PACIFIC GATEWAY PROPERTIES, INC.

                         INDEX


Part I - Financial Information:                               Page Number

Item 1.Financial Statements

Consolidated Balance Sheets 
as of September 30, 1996 and
December 31, 1995                                             3


Consolidated Statements of Income 
for the Three and Nine Months Ended 
September 30, 1996 and 1995                                   4


Consolidated Statements of Cash Flows
for the Three and Nine Months Ended 
September 30, 1996 and 1995                                   5
                                                              
Notes to Financial Statements                                 6-9

Item 2. Management's Discussion and 
       Analysis of Financial Condition
       and Results of Operations                              9-13


Part II - Other Information

  Item 1. Legal Proceedings                                   None
               
  Item 2. Changes in Security                                 None

  Item 3. Defaults Upon Senior 
               Securities          None

  Item 4.Submission of Matters to a Vote                      1313
                 of Security Holders                          

  Item 5.Other Information         None

  Item 6.Exhibits and Reports 
               on Form 8-K         13


                    
Signatures                         14

  <PAGE>
PACIFIC GATEWAY PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED) 
(In Thousands, Except Share Amounts)
                              As of September 30,               December 31, 
                                                1996                    1995 
ASSETS                                                  
Cash and short-term investments            $  2,665                 $    176 
Cash reserved for capital improvements          174    241 
Accounts receivable                             169    510 
Prepaid taxes                                   193    459 
Other current assets                            163     74 
Investment properties:
  Land                                        5,481  5,481 
  Buildings                                  31,847 31,847 
  Furniture, fixtures and equipment           9,787                    8,350 
Subtotal investment properties               47,115 45,678 
Less-accumulated depreciation and net
  realizable value reserve                   (13,841)                (12,106)
Investment properties, net                    33,274                  33,572 
Properties held for sale, net of accumulated 
depreciation of $8,080 at September 30, 1996
and $8,776 at December 31, 1995               14,366                  22,230 
Deferred tax asset                             4,000 6,831 
Note receivable, accrued interest and fees       240   225 
Capitalized loan costs, net of accumulated 
amortization of $1,299 and $1,210 at September 30, 1996 and December 31, 1995, 
respectively                                     737   816 
Capitalized lease commissions and rent 
concessions, net of accumulated amortization 
of $1,123 and $1,521 at September 30, 1996 
and December 31, 1995, respectively              526                     753 
     Total assets                           $ 56,507                $ 65,887 

LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable                            $    520                $  1,293 
Accrued payroll, property and sales taxes        576   513 
Prepaid rent                                     248   133 
Accrued interest on debt                         214   298 
State income taxes payable                        91    -- 
Amount due for tenant improvements               150    -- 
Other current liabilities                         25   127 
Tenant security deposits                         284   417 
Debt related to corporate, investment
  and hotel properties                        42,511                  58,838 
Other debt related to equity investment
  in Rincon Center Associates                  2,940                   2,940 
Deferred tax liability                        11,715                  10,514 
     Total liabilities                        59,274                  75,073 
Stockholders' deficit 
Common stock $1.00 par value--
  Authorized--10,000,000 shares
  Issued--4,011,150 shares                     4,011 4,011 
Paid-in-deficit                              (10,222)                (10,222)
Accumulated earnings (deficit)                 3,591                  (2,828)
Treasury stock, at cost--118,554 common 
shares at September 30, 1996 and 
December 31, 1995                             (2,037)                 (2,037)
Warrants for common stock                      1,890                   1,890 
Total stockholders' deficit                   (2,767)                 (9,186)
     Total liabilities and stockholders' deficit  $ 56,507          $ 65,887 
The accompanying notes are an integral part of these consolidated financial 
statements
                        PACIFIC GATEWAY PROPERTIES, INC.
                 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                     (In Thousands, Except Per Share Amounts)   

                         For the Three Months  For the Nine Months
                          Ended September 30,Ended September 30,
                            1996      1995       1996       1995      


Investment Properties:
  Rental revenues           $ 2,699  $ 2,896     $ 8,419   $ 9,124 
  Operating expenses        (1,456)   (1,542)     (4,056)   (4,208)
  Interest expense            (661)     (823)     (2,169)   (2,457)
  Depreciation and 
  amortization               (661)      (675)     (1,899)   (1,847)
    Investment properties
   income (loss)              (79)      (144)        295       612 
Hotel Property:
  Revenues                    989      1,077       4,868     5,508 
  Operating expenses       (1,009)      (954)     (3,554)   (3,623)
  Interest expense            (88)      (157)       (276)     (516)
  Depreciation and 
  amortization                --        (171)       --        (482)
    Hotel income             (108)      (205)       1,038      887 
Equity in Partnership Loss:  
  Rincon Center Associates     --       (941)       --      (2,708)
Interest and fee expense for 
debt related to equity 
investment in RCA              --       (99)        --        (222)
General and administrative 
expenses                     (408)     (387)      (1,266)    (1,045)
Interest income                27        14           76         29 
Other income, net              11        --          176         -- 
Income (loss)before property
transactions,income taxes and 
extraordinary item           (557)   (1,762)         319     (2,447)
Gain on sale of real estate 
assets, net                    --        --       10,900        177 
Income (loss) before income
 taxes and  extraordinary item(557)  (1,762)      11,219     (2,270)
Income tax benefit (provision)   8      364       (4,800)       551 
Income (loss) before 
extraordinary item            (549)  (1,398)       6,419     (1,719)
Extraordinary loss from 
extinguishment of debt         --       --          --         (233)
  Net income (loss)         $ (549) $(1,398)      $ 6,419   $(1,952)


Earnings (loss) per share, 
primary:                                   
Earnings (loss) before 
extraordinary item          $(0.13)   $(.34)       $1.53    $  (.42)
Extraordinary item             --       --           --        (.06)
  Net earnings (loss)       $(0.13)   $(.34)       $1.53      $(.48)


Earnings (loss) per share,
 fully diluted:
Earnings (loss) before 
extraordinary item          $(0.13)   $(.34)       $1.53      $(.42)
Extraordinary item             --       --           --        (.06)
  Net earnings (loss)       $(0.13)   $(.34)       $1.53      $(.48)
                                        
                                    
                                      
The accompanying notes are an integral part of these consolidated financial 
statements
 
                     PACIFIC GATEWAY PROPERTIES, INC.
               CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (In Thousands)

                                    For the Three Months  For the Nine Months
                                    Ended September 30,   Ended September 30,
                                      1996     1995         1996    1995      
Cash flow from operating activities:
  Net income (loss)                  $(549)  $(1,398)     $ 6,419 $(1,952)
  Non-cash revenues and expenses
      included in net income (loss):                     
      Provision for depreciation and                                         
           amortization                661       846        1,899  2,329 
      Equity in partnership loss       --        941          --   2,708 
      Gain on sale of real estate 
         assets, net                   --        --       (10,900)  (177)
      Extraordinary item               --        --           --     233 
  Change in assets and liabilities:
      Accounts receivable, prepaid 
      taxes and other current assets   760       244          510   (145)
      Other assets, net                (8)        58           (8)   154 
      Accounts payable and other current                                     
           liabilities                193        101         (678)    (5)
      Current tax liability          (535)       --            91     -- 
      Deferred taxes                   33       (300)       4,032   (808)
      Other liabilities               (11)       297        (132)    325 
  Net cash generated by operating 
      activities                      544        789       1,233    2,662      
Cash flow from investing activities:
  Additions to investment properties,
    properties held for sale, 
    capitalized loan costs (net) and 
    capitalized lease commissions and 
    rent concessions (net)           (359)     (487)      (1,452)  (2,038)
  Proceeds from sale of properties,
  net                                  --       --         19,122    510 
  Contributions to Rincon Center 
     Associates                        --      (277)          --     (677)
  Distribution from Rincon Center 
     Associates                        --       215           --      300 
  Net cash generated by (used in) 
     investing activities            (359)     (549)      17,670    (1,905)
                                                                             
Cash flow from financing activities:
  Borrowings under property and 
  corporate debt                    3,850        76        3,850     20,986 
  Borrowings in connection with 
  equity  investment, net              --       177           --       639 
  Payments on debt                 (4,020)     (673)      (5,082)  (22,532)
  Payment of loan costs and fees
  in connection with equity 
  investment                           --       --           --       (47)
  Mortgages satisfied in connection
  with property dispositions          (26)     (40)     (15,250)     (400)
  Issuance of treasury stock           --       --           --        45 
  (Increase) decrease in cash reserved 
 for capital improvements, net         (70)     287          68        385 
  Net cash used in financing 
   activities                        (266)     (173)    (16,414)      (924)
                                                                      
Increase (decrease) in cash and 
short-term  investments                (81)    67        2,489   (167)
Balance at beginning of period       2,746    125          176    359 
Balance at end of period          $  2,665 $  192      $ 2,665 $  192 

Supplemental disclosures of cash flow
     info
  Cash paid during the period for:
      Interest                   $    674 $ 1,011     $ 2,559  $ 3,366 
      Income Taxes               $      0 $   157     $   410  $   478 


The accompanying notes are an integral part of these consolidated financial
 statements

PACIFIC GATEWAY PROPERTIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter and Nine Months Ended September 30,
1996

1.  Organization and Summary of Significant
Accounting Policies

    The accompanying unaudited consolidated
financial statements should be read in conjunction
with the 1995 Form 10-K of the Registrant.  These
statements have been prepared in accordance with the
instructions of the Securities and Exchange Commission
Form 10-Q and do not include all of the information
and footnotes required by generally accepted
accounting principles for complete consolidated
financial statements.

    In the opinion of the Registrant, all material
adjustments of a normal recurring nature considered
necessary for a fair presentation of results of
operations for the interim periods have been included. 
The results of consolidated operations for the three
and nine months ended September 30, 1996 are not
necessarily indicative of the results that may be
expected for the year ending December 31, 1996.

Reclassifications

    Certain prior year amounts have been
reclassified to be consistent with current year
classifications.

Estimates and Assumptions

    The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets
and liabilities,  disclosure of contingent assets and
liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses
during the reporting period.  Actual results will
differ from those estimates.

2.  Rincon Center Associates Partnership (RCA)-- San
Francisco, California

    The Registrant owns general (non-managing) and
limited partnership interests in RCA totaling
approximately 23%, and is responsible for 20% of RCA's
cash requirements in excess of available financing,
subject to the agreement with the managing general
partner discussed below. 

    The Registrant earns a fee from RCA for posting
a $3.65 million letter-of-credit and earns a preferred
return at the prime rate plus 2% on its advances to
RCA.  In December 1995, the Registrant recorded a
provision for the write down of its equity investment
and loans to RCA to zero reflecting the fact that RCA
has experienced ongoing operating losses which made
realization of the Registrant's investment and loans
to RCA unlikely.  Additionally, commencing January 1,
1996, the Registrant (i) ceased recording its
allocable share of RCA's net loss as recording such
losses would result in "negative equity" in RCA for
the Registrant which would not properly reflect the
Registrant's economic interest in RCA, (ii) ceased
recording any interest or fee income on the
Registrant's advances to RCA and for posting a $3.65
million letter-of-credit, (iii) ceased recording
additional advances to RCA made on the Registrant's
behalf by RCA's managing general partner in
recognition of the fact that, as discussed below, such
advances are non-recourse to the Registrant and are
only required to be repaid from future cash
distributions to the Registrant by RCA, if any, and
(iv) ceased accruing interest on the funding
arrangement with the managing general partner of RCA
which amounted to $2,940,000 through December 31,
1995.  If the Registrant continued to record advances
made by the managing general partner on the
Registrant's behalf and continued to accrue interest
thereon the total amount outstanding under this
funding arrangement as of September 30, 1996 would
amount to $3,900,000. The Registrant's share of any
distributions from RCA will be used to reduce the
amount outstanding under a funding arrangement with
the managing general partner of RCA, as more fully
described below.  During the first nine months of
1996, no letter-of-credit fees or interest on advances
were paid by RCA to the Registrant.  The letter-of-credit has been renewed 
until December 23, 1996.

    The Registrant entered into an agreement in June
1993 with the managing general partner in RCA.  This
agreement provides the Registrant with the flexibility
to borrow funds from the managing general partner to
limit its future cash obligations to RCA.  Under this
funding arrangement, all amounts advanced, related
fees and accrued interest are non-recourse to the
Registrant.  This agreement does not reduce the level
of the Registrant's general and limited partnership
interests in RCA.  Interest accrues on the unpaid
portion of both the principal amount advanced and
related fees at the Bank of America prime rate plus2%.  
Amounts advanced under this funding arrangement,
plus related fees and accrued interest, are required
to be repaid from future cash distributed by RCA to
the Registrant, if any. 

    Summary financial statement data for RCA is as
follows (in thousands):
                                                                 
                             As of September 30,     As of December 31,
                                            1996                1995 
                           
Investment Properties, net              $110,500              $113,502 
Other assets                              20,400                22,623 

                                        $130,900              $136,125 
                           
Debt                                    $ 57,250               $58,720 
Amounts due to partners                  155,000               144,035 
Other liabilities                          8,183                12,253 
Partners' deficit                        (89,533)              (78,883)

                                        $130,900                $136,125 
                                                
                           Three Months Ended     Nine Months Ended
                                 September 30,        September 30,
                             1996     1995         1996       1995 
                           
Revenue                    $ 5,375  $ 5,105      $ 16,197   $ 15,358
Expenses:
    Operating and 
    lease expenses           2,941    3,407         9,621      9,630 
  Financing                  4,997    4,218        14,391     14,036 
 Depreciation and 
    amortization               946    1,608         2,835      3,558 
                             8,884    9,233        26,847     27,224 
Net loss                   $(3,511) $(4,128)     $(10,650)  $(11,866)
Registrant's share of 
  net loss of RCA$            (801)  $ (941)     $ (2,430)  $ (2,708)
                           
Registrant's share of cash
distributions from RCA,net $   125   $    --     $    254   $    -- 
Registrant's share of cash
contributions to RCA, net  $   283  $    62      $    870   $   377 
                           
     As of the date of this report, the managing general partner
of RCA had not completed the financial accounting for RCA. 
As a result, the Registrant has recorded an estimate of
revenue and expenses for the first nine months of 1996 based
upon actual operating revenue and expenses for January
through August 1996.  The Registrant has conferred with the
managing general partner of RCA and considers the projection
a reasonable estimate; however, actual results will differ
           from this projection.

3.   Per Share Data -  Per share data is based on the
weighted average number of the Registrant's common shares
and common share equivalents. Outstanding warrants and stock
options enter into the common shares outstanding using the
Treasury Stock Method.  The number of common share and
common share equivalents used in the earnings per share
calculations are as follows:

                              For the Three Months    For the Nine Months
                               Ended September 30,    Ended September 30,
                                 1996         1995        1996         1995

Primary                     4,290,710    4,075,372   4,208,196    4,075,372

Fully diluted               4,290,710    4,075,372   4,208,196    4,075,372

4.   Debt Secured by Mortgages on Real Estate From Primary
Lender - In December 1993, the Registrant completed a
restructuring of its non-revolving line-of-credit, letter-of-credit, unsecured 
bonds, and certain mortgages with its
primary lender.  Statement of Financial Accounting Standards
No. 15 requires the Registrant to account for future
interest resulting from this transaction using an imputed
interest rate versus the stated rates on the debt from the
primary lender.  In addition, the primary lender's
cancellation of debt of $4 million, at the time of the
restructuring, is not recognized for financial reporting
purposes. The debt has a recorded balance of $12.8 million
and $17.1 million at September 30, 1996, and December 31,
1995, respectively.  The imputed interest rate as of
September 30, 1996, was approximately 4.4%.  As a result,
the amount of interest recorded for financial reporting
purposes is lower than the stated interest on the face
amount of the debt by approximately $98,000 for the first
nine months of 1996.  The face amount of the debt with the
primary lender as of September 30, 1996, and December 31,
1995, was approximately $13.0 million and $17.3 million,
respectively.

     Other Mortgages on Real Estate - In September 1996,
the Registrant completed the refinancing of $3,850,000 of
debt related to North Tucson Business Center in Arizona. 
This debt was due in the fourth quarter of 1997.  The new
loan carries a 9.62% annual interest rate until maturity
with fixed monthly amortization payments of approximately
$34,000.  The loan is amortized over 25 years and is due
October 1, 2006.  Concurrent with the closing, the
Registrant deposited $40,768 with the lender to fund future
tenant improvements and leasing commissions.  Also, the loan
requires an additional $3,397 per month to be deposited for
future tenant improvements and leasing commissions during
the term of the loan.  The monthly amount may be decreased
if certain tenant renewals occur.  In addition, Registrant
is required to fund a debt service reserve of $8,200 per
month until $295,000 has been funded.  These funds are
included as cash reserved for capital improvements on the
Registrant's Consolidated Balance Sheet. 

5.   Subsequent Events - In October 1996, the Registrant
completed the refinancing of $1,000,000 of debt related to
its Weston Office Building in Florida.  This debt was due in
the fourth quarter of 1997.  The new loan carries an 8.45%
annual interest rate until maturity with fixed monthly
amortization payments of approximately $9,818.  The loan is
amortized over 15 years and is due October 5, 2001.  The new
loan has no prepayment penalty and the Registrant has
provided a guarantee of 50% of the outstanding principal
balance, or $500,000, whichever is greater. 

     On October 8, 1996, the Registrant completed its
foreclosure on a mortgage collateralized note receivable. 
At the foreclosure sale an unrelated party bid the face
value of the mortgage note plus accrued interest and costs
in the amount of $242,000 which the Registrant received on
October 18, 1996.


ITEM 2.  Management's Discussion and Analysis of Financial
Condition and Results of Operations

Liquidity and Capital Resources

  The bulk of the Registrant's resources are committed
to relatively non-liquid real estate assets.  Traditionally,
these assets, due to their value and cash flow, provided the
Registrant with an ability to generate capital as required,
both internally and externally, through asset-based
financings.  In addition, since 1992, assets or portions
thereof were sold to provide further liquidity.

  The Registrant has taken several actions to generate
and conserve cash, and continues to review and analyze
additional potential actions.  At the same time, the
Registrant is seeking to retain value and identify future
opportunities for investment.  At September 30, 1996, the
Registrant has $2.7 million in unrestricted cash, investment
properties and properties held for sale with a net book
value of $47.6 million, total fixed and variable mortgage
debt with a book value of $42.5 million and stockholders'
deficit of $2.8 million.  Accordingly, given the
Registrant's desire to increase its liquidity, the
Registrant has actively pursued potential sales of selected
real estate assets in the past, has restructured and
refinanced its mortgage debt, and has entered into an
agreement with the managing general partner of RCA to limit
the Registrant's cash obligations to RCA.  The Registrant
continues to evaluate alternatives to improve its liquidity
through debt refinancings and the sale of properties which
do not fit within its long term strategy.  Funds raised in
the preceding fashion would be used for such things as
tenant improvements and other capital requirements, certain
mandatory debt reductions, and possible new investments.  
            
  At September 30, 1996, the Registrant has the
following debt outstanding:

      Fixed rate, nonrecourse mortgage notes with a
       face value of $35.9 million at a quarter end
       weighted average stated interest rate of 9.0%
       per annum.
  
      Variable rate, non-recourse mortgage notes with
       a face value of $6.9 million at a quarter end
       weighted average stated interest rate of 8.3%
       per annum. 

      Nonrecourse loans, accrued interest and fees
       from the managing general partner in RCA with a
       face value of $3.9 million, interest at prime
       plus 2% (10.25% at September 30, 1996), with
       principal, interest and fees payable from future
       cash distributions to the Registrant by RCA, if
       any.

  Scheduled principal maturities on the above described
debt over the next twelve months ending September 30, 1997,
amount to approximately $1.5 million.  The Registrant is
also obligated to fund a reserve for certain property taxes,
insurance, tenant improvements, leasing commissions, and
debt service reserve in connection with two of its debt
agreements.  Scheduled funding under such agreements over
the twelve months ending September 30, 1997, amounts to
approximately $361,000.

  Additionally, the Registrant is contingently liable
under a bank letter-of-credit posted on behalf of RCA and
other mortgage debt in the amount of $3.65 million and
$850,000, respectively.  The letter-of-credit is undrawn at
September 30, 1996, and matures on December 23, 1996.  The
Registrant's Massachusetts property is pledged as collateral
for the letter-of-credit.

  The Registrant's minority, non-managing partnership
interest in RCA represents significant potential financial
exposure.  This exposure includes and may not be limited to
the potential tax liability associated with the Registrant's
negative tax basis, the joint and several guarantees
provided by the Registrant to the mortgage lender on Rincon
Center Phase Two and the master lessor on Rincon Center
Phase One, and the potential tax liability that would exist
from the cancellation of debt in connection with a possible
debt restructuring.

  Except as described above, at September 30, 1996, the
Registrant has no contractual commitments for any material
capital expenditures over the next twelve months or beyond
that are not expected to be funded from the $174,000 in cash
reserved for capital improvements or future cash flow
generated by operating activities.  Ongoing repair and
maintenance expenditures are expected to be funded from cash
flow generated by operating activities.  Future tenant
improvements and leasing commissions will be funded, in
part, from the reserve described above, unrestricted cash,
cash flow generated by operating activities and funds
generated from future debt refinancings or property sales,
if any.

  On April 4, 1996, the Registrant sold the Village
Commons Shopping Center, located in West Palm Beach,
Florida, to an unrelated  party for $19,300,000.  In
connection with this property disposition, the Registrant
realized a gain for financial reporting purposes of
$10,900,000.  The pre-tax net cash proceeds, after repayment
of $15,224,000 of mortgage debt and other costs of the sale,
amounted to $3,749,000.

  The Registrant is in escrow to sell the Radisson
Suites Hotel in Tucson, Arizona.  Under the terms of the
sale agreement, the Registrant exercised its option to
extend the close of escrow until December 1996.  If the sale
closes in December 1996, the Registrant expects to realize a
pre-tax gain of approximately $6 million.  During the
extended close of escrow period, the Registrant will be
reviewing potential acquisitions of one or more properties
in order to reinvest all or a portion of the proceeds from
the sale of the hotel in order to defer the estimated
$2,000,000 of taxes attributable to the gain on this sale.  
The pre-tax net cash proceeds, after repayment of $12
million of mortgage debt comprising principal payments of
$5.65 million variable and $6.35 million fixed rate mortgage
debt with the Registrant's primary lender and other costs of
the sale, are expected to amount to approximately $8.3
million.

  The following summarizes the land, fixed assets, and
other deferred costs of the hotel which are included in the
Registrant's Consolidated Balance Sheet as of September 30,
1996.

  Land                                $ 3,584,000 
  Building                             12,645,000 
  Furniture, fixtures and equipment     6,217,000 
                                       22,446,000 
  Accumulated depreciation and 
  amortization                         (8,080,000)
                                       14,366,000 
  Other deferred costs, net                36,000  
                                      $14,402,000 

  As previously discussed, the Registrant has entered
into a purchase agreement with an unrelated party to sell
its Radisson Suite Hotel in Tucson, Arizona.  Due to the
hotel's low tax basis, the Registrant is evaluating whether
or not to complete a tax deferred exchange.  If the
Registrant does not complete a tax deferred exchange, there
will be excess cash proceeds after payment of taxes, debt
and cost of the sale which will be used for future capital
improvements, leasing costs and possible acquisitions.  In
addition, the Registrant has loan applications in process to
refinance its San Jose, California office building which, if
accomplished, will provide excess debt proceeds to the
Registrant and secure fixed rate mortgage debt at this
property.  The excess debt proceeds will be used for general
corporate purposes.  The Registrant can make no assurances
that the sale of the hotel or refinancing will be completed.

Material Changes in Results of Operations

  Investment Properties  -  During the first nine months of
1996, the income from investment properties was $295,000
compared to income of $612,000 during the first nine months
of 1995.  During the third quarter of 1996 the loss from
investment properties was $79,000 compared to the loss of
$144,000 for the third quarter of 1995.  The decrease in
income from investment properties for the first nine months
of 1996 compared to 1995 is primarily attributable to the
sale of Village Commons Shopping Center (VCSC) in April 1996
and a reduction in occupancy at Walnut Creek Executive Park. 
Interest expense decreased from $2,457,000 during the first
nine months of 1995 to $2,169,000 during the first nine
months of 1996 primarily as a result of reduced debt
balances.  Depreciation and amortization expense increased
as a result of commencing depreciation of expenditures
capitalized during 1995 and early 1996 relating to the
Registrant's leasing activities and capital improvement
projects which was offset by the cessation of depreciation
on the VCSC which was sold in April 1996.

  Hotel Property  - During the first nine months of 1996,
the hotel property income was $1,038,000 compared to
$887,000 during the first nine months of 1995.  During the
third quarter of 1996, the hotel property loss was $108,000
compared to $205,000 for the third quarter of 1995.  The
increase in income during the third quarter was due to a
decrease in occupancy offset by an increase in average daily
rate and the cessation of depreciation expense in 1996. 
Average occupancy decreased from 81.0% for the first nine
months of 1995 to 52.1% for the first nine months of 1996. 
The average daily rate increased from $59.36 for the first
nine months of 1995 to $65.78 for the first nine months of
1996.  Interest expense decreased from $516,000 for the
first nine months of 1995 to $276,000 for the first nine
months of 1996 primarily as a result of the effects of the
lower principal balance on the hotel's debt.  Effective
January 1, 1996, the Registrant ceased recording
depreciation on the hotel since it is classified as an asset
held for sale in accordance with Statement of Financial
Accounting Standards No. 121.  Had the Registrant recorded
depreciation on the hotel, such depreciation would have
approximated $444,000 for the first nine months of 1996 and
approximately $148,000 for the third quarter of 1996.  Total
hotel revenues and expenses in 1996 have also decreased from
1995 as a result of a change in restaurant operations.  The
restaurant was leased to an unrelated party in 1995 and, as
a result, no restaurant revenues or expenses are reflected
in 1996, resulting in a decline in hotel revenues of
$329,000 and operating expenses of $111,000 for the first
nine months of 1996.
                        
  Equity in Partnership Loss - Rincon Center Associates
(RCA) - As of December 31, 1995, the Registrant recorded a
provision for the write down of its equity investment and
loans to RCA to zero reflecting the fact that RCA has
experienced ongoing operating losses which made realization
of the Registrant's investment and loans to RCA unlikely. 
Additionally, commencing January 1, 1996, the Registrant (i)
ceased recording its allocable share of RCA's net loss as
recording such losses would result in "negative equity" in
RCA for the Registrant which would not properly reflect the
Registrant's economic interest in RCA, (ii) ceased recording
any interest or fee income on the Registrant's advances to
the Partnership and for posting a $3.65 million letter-of-credit, 
(iii) ceased recording additional advances to RCA
made on the Registrant's behalf by RCA's managing general
partner in recognition of the fact that, as discussed below,
such advances are non-recourse to the Registrant and are
only required to be repaid from future cash distributions to
the Registrant by RCA, if any, and (iv) ceased accruing
interest on the funding arrangement with the managing
general partner of RCA which amounted to $2,940,000 through
December 31, 1995. If the Registrant continued to record
advances made by the managing general partner on the
Registrant's behalf and continued to accrue interest thereon
the total amount outstanding under this funding arrangement
as of September 30, 1996 would amount to $3,900,000.  The
net loss for RCA decreased from $11,866,000 in the first
nine months of 1995 to an estimated $10,650,000 in the first
nine months of 1996.  The net loss for RCA decreased from
$4,128,000 in the third quarter of 1995 to an estimated
$3,511,000 in the third quarter of 1996.  The decrease in
the loss is primarily the result of an increase in operating
revenues and a decrease in financing expenses.  The
Registrant's unrecorded equity share of the RCA loss
amounted to $2,430,000 and $2,708,000 during the first nine
months of 1996 and 1995, respectively.  The Registrant's
equity share of the RCA loss amounted to $801,000 and
$941,000 in the third quarter of 1996 and 1995,
respectively. 

  Interest and Fee Expense for Debt Related to Equity
Investment in RCA -  During the first nine months of 1995,
the Registrant incurred $222,000 in interest and fee expense
related to the funding arrangement with the managing general
partner of RCA, as previously discussed.  

  General and Administrative Expenses -  General and
administrative expenses in the first nine months of 1996
amounted to $1,266,000 compared to $1,045,000 for the first
nine months of 1995.  General and administrative expenses
for the third quarter of 1996 and 1995 were $408,000 and
$387,000, respectively.  The increase is primarily
attributable to an increase in legal and accounting fees in
connection with the Registrant's prospective sale of the
Company, directors fees, insurance and severance
compensation to former employees.  

  Interest Income  - Interest income on the note receivable
and cash investments was $76,000 and $29,000 during the
first nine months of 1996 and 1995, respectively.  Interest
income on the note receivable and cash investments was
27,000 and $14,000 during the third quarter of 1996 and
1995, respectively.

  Other Income, Net - Other income consisting primarily of
business advisory fees and income from the sale of vacant
land in Colorado was $176,000 and $11,000 during the first
nine months and third quarter of 1996, respectively.

  Gain on Sale of Real Estate Assets, Net - In April 1996,
the Registrant sold the Village Commons Shopping Center,
located in West Palm Beach, Florida, to an unrelated  party
and realized a gain for financial reporting purposes of
$10,900,000.  In June 1995, the Registrant sold a parcel of
land in Walnut Creek, California, to an unrelated  party and
realized a gain of $177,000.

  Income Tax Benefit (Provision) - A tax benefit is
recorded in connection with the net loss for the three
months ended and a tax provision is recorded in connection
with the net income for the nine months ended September 30,
1996, of $8,000 and $4,800,000 respectively, in accordance
with Statement of Financial Accounting Standards No. 109. A
tax benefit was recorded in connection with the net loss for
the three and nine months ended September 30, 1995, of
$364,000 and $551,000, respectively.

Risks and Uncertainties Associated with Forward Looking
Statements

    This document contains forward looking statements which
involve risks and uncertainties.  The Registrant's actual
results may differ significantly from the results discussed
in the forward looking statements.  Factors that may cause
such differences include, but are not limited to, the risks
described under item 7, "Management's Discussions and
Analysis of Financial Condition and Results of Operations -
Discussion of Known Trends, Events and Uncertainties" in the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995.

ITEM 4.  Submission of Matter to a Vote of Security Holders

    A Special in Lieu of Annual Meeting ("Annual Meeting")
of Shareholders of the Registrant was held on October 29,
1996, and the Shareholders re-elected all seven incumbent
Directors.  At the Annual Meeting, 3,039,966 shares of a
total of 3,892,596 shares were represented; 3,039,966 shares
voted in favor of all Nominees for Director.

    At the Annual Meeting a motion was approved to adjourn
the Annual Meeting  to November 19, 1996, at 9:00 a.m. at
the Registrant's corporate offices at 101 Spear Street,
Suite 215, San Francisco, California to allow additional
time for votes on proposal 2, Adoption of the 1996 Stock
Option Plan. 

ITEM 6.  Exhibits and Reports on Form 8-K

   a)   Exhibits

   10.  Agreement dated October 29, 1996, between
   Registrant and Raymond V. Marino (Management
      Contract)<PAGE>
                                            SIGNATURES


Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.


                     PACIFIC GATEWAY PROPERTIES, INC.    
                            Registrant
                                 


Date: November 14, 1996     Raymond V. Marino                
                     Raymond V. Marino
                     President and Chief Executive  Officer



Date: November 14, 1996     Felecia Vernon-Chancey            
                     Felecia Vernon-Chancey
                     Vice President and Controller
                     (Principal Accounting Officer)




               EMPLOYMENT AGREEMENT


This Employment Agreement, dated as of October 29, 1996, for
reference purposes, is entered into between PACIFIC GATEWAY
PROPERTIES, INC., a New York corporation (the "Company"),
and RAYMOND V. MARINO, II ("Executive"), and sets forth the
terms and conditions of the Company's continued employment
of Executive, as set forth below.  Executive and the Company
hereby acknowledge and agree that the certain Employment
Agreement dated as of March 21, 1996 (the "Previous
Employment Agreement") will continue to remain in effect
until January 2, 1997, at which time this Agreement will
become operative as more fully set forth in paragraph 9
below.

1.  Titles; Duties.  Executive shall be employed as the
Chief Executive Officer and President of the Company.
Executive's duties and responsibilities shall be those
customarily attendant to such a position, and Executive
shall faithfully and to the best of his ability discharge
such duties.  Consistent with the foregoing Executive shall
devote his full-time energy and skill to such employment,
except that he may (i) continue his participation as a
director, officer or member of a reasonable number of non-profit organizations,
and (ii) serve as a director and/or
officer of a family-owned corporation which does not compete
with the Company.  Executive shall continue to be a member
of the Board of Directors of the Company, and he will be
nominated by the Board of Directors for re-election at the
next annual meeting of the shareholders of the Company and
thereafter at each subsequent annual meeting of the
shareholders during any Extension Term (as defined below). 
Upon termination of his employment hereunder, and upon the
request of the Board of Directors of the Company, Executive
will promptly submit his resignation from the Board of
Directors.

2.  Employment Term.  The term of Executive's employment
initially shall be for a period of two years (the "Initial
Term") commencing as of January 2, 1997 (the "Commencement
Date") and expiring on January 1, 1999.  Following the
Initial Term, Executive's employment by the Company will
automatically be extended for additional one (1) year terms
("Extension Term(s)") until terminated in the manner
prescribed in this paragraph.  Either party may terminate
Executive's employment at the end of the Initial Term or any
Extension Term by giving to the other party written notice
of such termination no later than the October 1 immediately
preceding the expiration of such Initial or Extension Term. 
Notice of termination that does not comply with the
preceding sentence shall be ineffective and the employment
term will be automatically extended as provided above. 
Prior to expiration of the Initial Term or any Extension
Term, Executive's employment may be terminated by the
Company only for "cause", as that term is defined in
paragraph 6, below.  If the Company terminates Executive's
employment hereunder by providing written notice to
Executive as provided in this paragraph 2, Executive will be
entitled to receive all of the severance benefits set forth
in paragraph 6(c), except that no acceleration of vesting of
any unvested options under subparagraph 6(c)(iv) will occur
and Executive will have the right to exercise each vested
option for a period expiring on the earlier of (i) the
stated expiration date of such option, or (ii) twelve (12)
months from the date of termination.

3.  Base Compensation.  For his services, the Company will
pay Executive a base salary at the rate of One Hundred Fifty
Thousand Dollars ($150,000.00) per year (the "Base Salary"),
payable in accordance with the Company's general practices
for the payment of base salary to its executives.  
Executive's Base Salary will be reviewed annually and will
be subject to adjustment by the Board of Directors, but it
may  not be decreased.  The Company will give Executive
written notice of any such adjustment no later than
September 21 of each year.

4.  Bonuses.  As additional compensation for performance
of the services by Executive during the term of this
Agreement, Executive shall be entitled to participate in any
incentive pay or bonus programs established by the Company
from time to time.  Such participation shall be on terms at
least as favorable as those enjoyed by any other executive
officers of the Company.  In addition, the Company will pay
to Executive an annual bonus, the amount of which will be
determined in the sole discretion of the Board of Directors
of the Company acting in good faith, provided that the Board
of Directors will take into consideration Executive's
contributions and/or accomplishments with respect to
improving the operations of the Company and enhancing the
values of the properties owned, either directly or
indirectly, by the Company.  The annual bonus amount will be
paid to Executive no later than thirty (30) days after the
end of the fiscal year of the Company.

5.  Stock Options.  
a)  Subject to approval by the shareholders of the Company
of the Company's 1996 Stock Option Plan (the "Plan"),
options to acquire 100,000 shares of common stock of Company
have been granted to Executive pursuant to the Previous
Employment Agreement.  The Company is obligated under the
Previous Employment Agreement to use its best efforts to
cause the Plan to be approved by the shareholders of the
Company, will submit the Plan to its shareholders at the
next shareholders meeting scheduled to be held on October
29, 1996 and will recommend to the shareholders that they
approve the Plan at that meeting.

b)  Until the Plan is approved by the shareholders, or if
the Plan is not approved by the shareholders and the option
grant described in (a) above becomes null and void,
Executive will be entitled to receive a special bonus in
accordance with the immediately following sentence in the
event of (i) a sale of all or substantially all of the
assets of the Company, (ii) a merger or any other
combination or consolidation in which the Company is not the
surviving entity (or if the Company is the surviving entity
but the shareholders of the Company immediately prior to
such merger do not own at least 51% of the voting stock of
the Company immediately after such merger or combination or
consolidation), (iii) 50% or more of the common stock is
acquired by a third party in a tender offer or other
acquisition of stock in a single transaction or series of
related transactions, or (iv) a full or partial liquidation
or a dissolution of the Company.  If any of the foregoing
events occur during the Initial Term, any Extension Term, or
during the twelve month period immediately thereafter,
Executive will be paid, upon the consummation or completion
of the transaction, an amount equal to the cash payment per
share or value of the consideration per share received by
the shareholders of the Company, less $2.5625 per share,
multiplied by 100,000.  For example, if the shareholders
receive cash or securities worth a $5.00 per share,
Executive would receive a lump sum cash payment of $243,750
($5.00 - $2.5625 = $2.4375 x 100,000 = $243,750).

III. Termination of Employment.
a)  Termination by Company Without Cause.  If the Company
at any time terminates Executive's employment hereunder
without "cause" (as defined in paragraph (b) below), the
Company will provide to Executive the Severance Benefits
described in paragraph (c) below.  Without limiting the
foregoing, Executive's employment with the Company shall be
deemed terminated without "cause" for the purposes of this
Agreement if his employment termination occurs voluntarily
or involuntarily following (i) a change in Executive's
position with the Company which materially reduces
Executive's level of responsibility, (ii) a reduction in
Executive's level of compensation (including Base Salary,
fringe benefits, and any incentive or bonus plan(s) for
which Executive may become eligible in the future); or (iii)
a relocation in the principal place for the performance of
Executive's duties of more than twenty-five (25) miles
(i.e., any relocation more than 25 miles from San
Francisco), provided and only if such change, reduction or
relocation is effected without Executive's written
concurrence.

b)  Termination by Executive, or Termination by Company
for Cause.  If the Executive voluntarily terminates his
employment hereunder (unless such termination is deemed
without cause as provided in paragraph 6(a) above), or if
the Company terminates Executive's employment for cause (as
defined below), such employment will terminate on the date
fixed by Executive or the Company (as the case may be), and
thereafter the Company will not be obligated to pay
Executive any additional compensation, other than
compensation due and owing through the date of termination
(and Executive shall not be obligated to refund any bonus
amount previously paid to him by the Company or previously
specifically awarded to him by the Company's Board of
Directors) and all payments and other benefits which he is
otherwise entitled to receive under applicable law, subject
only to the rights of Executive under paragraph 8 below in
the case of a voluntary termination by Executive following a
"change in control."  Upon the occurrence of either of such
termination events, Executive will have the right to
exercise any or all of his vested stock options for a period
of ninety (90) days after the date of such termination but
not beyond the stated expiration date(s) of the term(s) of
the options, as provided in his stock option agreement(s). 
"Cause," for purposes of this Agreement, only shall mean any
of the following:

i)self-dealing by Executive resulting in personal profit to
him;
ii)the commission of a criminal act by  Executive relating
to the performance of his duties hereunder; 
iii)habitual intoxication of Executive by alcohol or drugs
during working hours; or      
iv)failure to follow the duly authorized directions of the
Board of Directors, if Executive does not remedy such
failure within 60 days of receiving written notice from the
Board of such failure.

c)   Severance Benefits.  If Executive's employment is
terminated by the Company without cause the Executive shall
be entitled to the following benefits in addition to
receiving all payments and other benefits to which he would
otherwise be entitled under applicable law ("Severance
Benefits"):
i) The Company will continue to pay to Executive his then-effective Base Salary
 for a period of twenty-four (24) months from the date of termination.
ii) The Company shall continue to provide Executive with
medical, dental, vision, long-term disability and life
insurance coverage as generally available to executives of
the Company, together with the all other benefits described
in paragraph 7, below, for a period of twenty-four (24)
months from the date of termination.
iii) The Company will pay to Executive an amount equal to
the greater of
(i) the average of his annual bonuses earned with respect to
the immediately preceding two full calendar years of his
employment, or(ii) the amount of the most recent annual
bonus, if any, paid to him pursuant to the terms of the
Previous Employment Agreement.

(iv) The vesting period of any unvested options granted to
Executive will accelerate and will become exercisable, and
Executive will have the right to exercise all vested options
for a period of twelve (12) months from the date of
termination, but not beyond the stated expiration date(s) of
the term(s) of the options.

7)Additional Benefits.
a)Vacation.  In addition to the Company's paid vacation
days, Executive shall be entitled to twenty (20) vacation
days with full pay in each year of employment, subject to
scheduling with the Company's Board of Directors so as to
not unreasonably disrupt the Company's business operations.
b)Insurance Benefits.  The Company shall provide Executive
with medical, dental, vision, long-term disability and life
insurance coverage commensurate with like coverage provided
to other executives of the Company, but in no event less
comprehensive than the coverage provided by the Company to
Executive prior to execution of this Agreement.
c)Other Benefits.  Executive also will be entitled to all
other benefits generally available to other executive and
managerial employees of the Company as he becomes eligible
for them.
8)Change In Control.  If during Executive's employment
hereunder, a "change in control" of the Company occurs,
Executive will have the option of either terminating his
employment hereunder or continuing his employment with the
Company in accordance with the terms of this Agreement, such
option will be exercisable at any time until the first
anniversary date of the occurrence of any "change in
control" of the Company.  If Executive elects to terminate
his employment at any time during that one (1) year period,
he will be entitled to receive all of the severance benefits
set forth in paragraph 6(c), except that the period for
exercising any vested options will be for a period of three
(3) months from the date of termination of his employment,
but not beyond the stated expiration date(s) of the term(s)
of the options.  If Executive does not elect to terminate
his employment, but if Executive agrees to remain employed
under different terms of employment than those contained in
this Agreement, he will be entitled to be paid, in addition
to his compensation pursuant to any new employment
arrangement, his Base Salary for the remainder of the
Initial Term or any Extension  Term, as applicable.  For the
purpose of this Agreement, a "change in control" of the
Company shall only be deemed to have occurred if (i) in a
single transaction or series of related transactions a
transfer of ownership of the Company's common stock occurs
as a result of which the stockholders immediately prior to
such transaction or series of transactions no longer
control, directly or indirectly, fifty percent (50%) or more
of the voting stock of the Company, or (ii) the Company
merges or consolidates with another corporation (other than
a subsidiary of the Company) or sells all or substantially
all of its assets and at least fifty percent (50%) of the
voting stock of the surviving or purchasing entity is not
controlled, directly or indirectly, by stockholders who were
stockholders of the Company immediately prior to such
transaction or (iii) the composition of the Board of
Directors changes such that a majority of the then Board of
Directors are no longer persons who were serving as
directors of the Company on January 1, 1996.  A public
distribution by the Company of its common stock shall not be
a "change in control" within the meaning of this Agreement.
9)Previous Employment Agreement.  Company and Executive
acknowledge and agree that on January 2, 1997, this
Agreement will supersede and replace the Previous Employment
Agreement and on January 2, 1997, the Previous Employment
Agreement will terminate and all rights and obligations of
the parties under the Previous Employment Agreement will
cease and be of no further force or effect, provided,
however, that the Previous Employment Agreement will survive
to the extent necessary to protect each party's interests
concerning all rights which accrued and remain outstanding
as of January 1, 1997.

10)Other Provisions.

a) Company will reimburse Executive for all actual legal
fees and expenses incurred by Executive in connection with
the negotiation of the terms of this Agreement up to an
amount not to exceed Two Thousand Five Hundred Dollars
($2,500).
b)   Upon presentation of appropriately itemized
documentation, the Company shall pay or reimburse Executive
for all reasonable and necessary expenses incurred by him in
the  performance of his duties hereunder.
c)   The Company shall be obligated to defend and indemnify
Executive from and against liabilities arising out of
performance of his duties hereunder, to the fullest extent
permissible under New York law, and the Company will
maintain its present Directors and Officers Insurance and
Company Reimbursement policy at not less than its present
limits of liability and not more than its present deductible
level throughout the Initial Term and any Extension Terms.
d) In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable
for any reason by final judgment of a court of competent
jurisdiction, (i) the remaining provisions or portions of
this Agreement shall be unaffected thereby and shall remain
in full force and effect to the fullest extent permitted by
law, and (ii) if the effect of a determination that such
provision is either invalid or unenforceable is to modify to
Executive's detriment, reduce or eliminate any payment or
benefit provided under this Agreement, the Company shall
promptly negotiate and enter into an Agreement with
Executive containing alternative provisions (reasonably
acceptable to Executive), that will restore to Executive (to
the extent legally permissible) substantially the same
economic, substantive and income tax benefits that Executive
would have enjoyed had any such provision of this Agreement
been upheld as valid and enforceable.  Failure to insist
upon strict compliance with any provision of this Agreement
shall not be deemed a waiver of such provision or of any
other provision of this Agreement.
e)This Agreement embodies the entire Agreement between the
parties relating to the subject matter hereof, and
supersedes all previous agreements or understandings. No
provision of this Agreement may be amended or waived, except
by a writing signed by the parties.
f)In the event of any dispute with respect to or otherwise
arising out of or relating to this Agreement, the prevailing
party shall be reimbursed by the other for all costs and
expenses, including attorney fees (including those fees
incurred in connection with any appeal) reasonably incurred
by the prevailing party in enforcing its rights hereunder. 
Any legal proceeding to resolve such a dispute shall be
brought in either the Superior Court of the State of
California for San Francisco County, or the United States
District Court for the Northern District of California, as
appropriate.
g)This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws
of the State of California, excluding its choice of law
rules.
h)The Company represents and warrants to Executive that this
Agreement has been, or will be as soon as practicable after
its execution and delivery, duly authorized and approved,
ratified or confirmed by the Board of Directors of the
Company, and the execution and delivery of this Agreement by
and on behalf of the Company by not less than two (2)
members of the Compensation Committee of the Board of
Directors likewise has been or will be authorized and
approved, ratified or confirmed.

This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the
other party, it being understood that all parties need not
sign the same counterpart.

7)All payments to Executive hereunder shall be subject to
any required withholding by the Company for applicable
income and employment taxes.
In WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.


PACIFIC GATEWAY PROPERTIES, INC.


By:  Raymond V. Marino, II
     RAYMOND V. MARINO, II



By:  Martin S. Roher
     Martin S. Roher, Director and Member of Compensation   Committee


By:  Marshall Jacobs
     Marshall Jacobs, Director and Member of Compensation   Committee

By:  John Winfield
     John Winfield, Director and Member of Compensation
Committee