News & Research Archive

Formula Retail Restrictions in San Francisco

May 28, 2013

 

SocketSite recently published an article on the San Francisco Planning Commission's rejection of Starbucks' proposal to take over the existing corner 2,500 square foot retail space at 2201 Market Street and it got me thinking about what is wrong with this city's formula retail restrictions. Here is a recap of the Socketsite article:

The basis for the Department's rejection:

  • There are currently five formula retail uses within 300 feet of the Subject Property that include Peet's Coffee & Tea, Wells Fargo Home Mortgage, Community - A Walgreen's Pharmacy, Chase Bank and Verizon Wireless. The proposed Starbucks would bring the concentration of formula retail to 21% within 300 feet of the Property.
  • The Upper Market NCT is well served by existing similar eating and drinking establishments that are considered coffee houses, including Church Street Café, Peet's Coffee & Tea, Sweet Inspiration and Café Flore.
  • The Project would be detrimental to the neighborhood by occupying a prominent corner lot with a formula retail use that uses standardized color schemes, decor and signage that will detract from the distinctive character of the Upper Market Neighborhood which includes primarily local, independent retail businesses.
  • The Project would displace an existing business that is independent and locally owned.

The counter argument came from the Buena Vista Neighborhood Association (BVNA):

  • BVNA believed that the current, temporary retail use at 2201 Market Street is an under-use and not beneficial to the neighborhood.
  • The building's current structure and appearance have a negative effect on its neighborhood. By contract, Starbucks plans to substantially renovate the site for its new operation. This would bring substantial aesthetic improvement to a corner, which needs that badly. Further, it is a proven retail maxim that "magnet" businesses (such as the proposed Starbucks at this location) bring additional positive customer traffic to their area, another deficiency of the current operation. In fact, even so-called "competitive, independent" businesses nearby can benefit from the proposed new Starbucks, provided that they are smart merchandisers and afford themselves of the opportunity to distinguish themselves.

My concern about both arguments is what has happened to private property rights – I cannot understand why any retailer or landlord should have to go through such a public approval process that costs a fortune and takes so long. Shouldn't the public be able to decide the fate of a store simply by deciding whether or not to shop there? To me, that is the ultimate public approval process.

By rejecting this store, we have lost out on many outcomes that would have been of great benefit to Market Street's revitalization: union jobs to build out formula stores, potential added property tax value as a result of higher rents, a major upgrade of a strategically important corner on Market that is underutilized and negatively impacts the traffic flow supporting the other retailers on the block. This is happening over and over again throughout the city.

I fully appreciate public input and understand the concerns of losing our city’s local retailers, however, this corner space on Market has been available for years with no local takers. The existing building is in need of a major renovation and it will take a retailer paying big rents in order to make the necessary investment to rebuild it. In order to move forward with city planning we need to take bureaucracy out of these decisions. Lets find a way to speed up the process and support new businesses, not make it so expensive and so difficult for business owners that they stop looking to San Francisco as a place to set up shop.

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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 28 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, www.commercialspacefinder.com.

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