Take Your Head out of the Sand San Francisco
Mar 28, 2011
The recent decision to offer Twitter a break on city taxes in favor of them staying in San Francisco has caused heated debate about giving a tax break to one company while other firms have not been given the same advantage. Zenga, for instance, did not enjoy such a break in staying in the city and taking over 250,000 square feet of office space. Saleforce's decision to stay in San Francisco and build a new campus here is another example of a company that didn't receive a break.
Led by Mayor Lee, San Francisco's attempt to keep a growing company like Twitter in San Francisco is an important start to keep jobs here in San Francisco. However, a major problem is coming soon to San Francisco and no discussion, no concern from government officials, Chamber of Commerce, businesses or landlords has occurred and its overall impact on San Francisco could be devastating.
In 2009, San Francisco passed the largest rezoning measure in the history of our city called the Eastern Neighborhood Zoning Plan. This plan effectively rezoned the majority of the Mission, Potrero, Dog Patch and outer South of Market areas of our city to reduce office space use in favor of industrial and service related uses. In January 2012 the city will begin the enforcement of eviction of office users that will no longer be in buildings zoned for office use. Despite how crazy this may sound the process is already in place.
The Progressive Political Movement started this process over five years ago in an attempt to try to bring blue-collar industrial and manufacturing jobs back to the city. They strongly believe that it would be better to leave buildings vacant and wait for these types of jobs to come back to San Francisco than risk further takeover of these neighborhoods by higher paid office jobs that would further displace lower income wage earners. The Progressive Political Movement was successful in convincing the city to move forward with this zoning plan and in 2012 it will begin being fully implemented. Landlords started receiving letters in 2009 indicating that they had to legalize their current office space if they were not currently zoned at a cost of $10.50 cents per square foot. Others were told that they had to produce evidence of permits showing that their buildings were in fact properly converted, costing these landlords attorney and architectural costs to accommodate the city's demands.
Can you imagine the news stories when the first "Zenga or Twitter" type firm finds out that they are no longer legal in their current office space and they will be forced to move? Imagine the loss to landlords, to tenants, as well as the loss of city jobs. Property tax values and the pressure on remaining office rents to increase in other parts of the city will make it less affordable to do business in the city.
San Francisco needs to take its head out of the sand and work now to rework this zoning plan immediately. It will be a major political battle but most be fought now before this plan is fully implemented. The Twitter debate of today will be nothing compared to what is coming if this zoning change is allowed to happen.
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Written by: Hans Hansson
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 26 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email firstname.lastname@example.org or call him at (415) 765-6897. You may also check out his website, http://www.commercialspacefinder.com/.