Properties with a city pre-approved entitlement enables the owner to more rapidly and cost-effectively develop an existing property into say a bigger or better one. Building permits, which are discretionary and based on approval, are entitlements. As you can imagine, changing anything on an existing property in the Bay Area often requires the permission of the city's planning and building departments. This approval process can take anywhere from a few months to years, and is quite a complex process, requiring that you know what to do. It can include neighborhood notification and approval, discretionary reviews, investigations, environmental impact reports. And, it can easily cost you a lot of money.
For example, 2120 Carmelita is a property just on the market with a city approved entitlement that will allow the owner to take the current property from a 2-bedroom, single-story property, to a 4-bedroom, 3 bathroom and 2-story one. This means, you can readily start development. If you were to start from scratch and file a request to the Burlingame City Planning and Building Departments, it would have taken you 1-year or more to get permission first. And, this adds up to a considerable amount of time and costs to pay down mortgage and any delays in construction for that year while you wait.
For more information, check out the San Francisco Planning Department FAQs section.