News & Research Archive

San Francisco Needs to Act Fast

Feb 17, 2009

 

San Francisco Needs to Act Fast to Create Real Opportunities for New Small Businesses

 

  In more than 25 years as a commercial real estate broker, this is the third downturn that I have experienced. In each of the others the pattern to recovery was the same: People lose their jobs; they cannot find new jobs; and then they decide to start their own businesses to survive. The point of entry for many is to take advantage of retail opportunities.

 

In November 2007, San Francisco instituted an 11-store rule. If a retailer has more than 11 stores, in order to open a location in a new neighborhood they must go through a public review process. This lengthy process offers no assurance that the retailer will receive approval. The City’s requirement poses serious barriers to retail chains that seek to take advantage of potentially successful neighborhood locations.

 

But not only large 11-store retailers are affected. If a smaller retailer finds a location, they cannot simply rent the place and move in: The City must determine the retailer’s proposal to be a “change of use.” If the retailer fails to meet this requirement, then that retailer is subject to a lengthy review process, again with no guarantee of approval. In addition, the retailer must hope that the landlord will wait for the approval, which could mean six to nine months without rent. This makes the process of securing a retail space even more difficult and costly.

 

A case in point: I have a 1,200-square-foot retail space for lease with a local landlord. The owner is anxious to lease the premises and is willing to negotiate a fair deal. Numerous small-business owners have expressed serious interest in establishing a food-type retail outlet in this location. But when they go to the building permit department, we typically do not hear from them again: The approval process is just too discouraging. We have attempted to secure professionals who specialize in zoning issues to assist these potential tenants. The cost to hire a qualified attorney and architect runs between $6,000 and $9,000—paid up front—with no assurance of success.

Prospective retailers in San Francisco are looking at six to nine months to secure the necessary approvals and building permits. Next, they have to account for construction time, which could add another two months. Any retailer who starts the approval process today could be a year away from opening their doors. This situation kills any opportunity for a small business to get started, and it puts further pressure on people who are seeking a way to survive in these difficult times. In addition, landlords lose the opportunity to secure rent. In the long term, this situation will result in lower property values, which in turn means less property tax paid to the City.

San Francisco needs to create a streamlined process for retailers to secure the necessary approvals. The City could develop a fast-track system that would help small retailers get up and running quickly. There is no reason why a retailer who seeks to lease a 1,200-foot space must wait for more than 30 days to find out whether they can occupy that space.

The City needs to generate more jobs and create more real opportunity for its citizens—not continue to raise barriers to opportunity. All you have to do is drive down most retail streets in San Francisco and you can see the effect that vacant stores have on the remaining businesses that are trying to succeed. Let’s get the City to help get these spaces filled.

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Written by: Hans Hansson

E-mail: hans@starboardnet.com


Hans Hansson is President of Starboard TCN Worldwide Real Estate Services as well as a member of the Board of Directors for TCN Worldwide Real Estate. Hans has been an active broker for over 24 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email hans@starboardnet.com or call him at (415) 765-6897. You may also check out his website, http://www.commercialspacefinder.com/.

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