News & Research Archive

New Formula Retail Restrictions in San Francisco Goes from Bad to Worst

May 23, 2014

 

San Francisco Formula Retail RestrictionsThis week, San Francisco Supervisor Eric Mar introduced a proposal to increase restrictions on chain stores in San Francisco. The new formula retail restrictions is the latest effort amid a simmering debate on how best to preserve neighborhood character without impeding economic activity.

The formula will be presented to the Board of Supervisors for a vote taking place this June. The key issue that surfaces with this new legislation is the increased length of time a retail space could remain vacant. Additionally, this legislation will take away the needed services from the very neighborhoods that the law is trying to protect.

Some highlights of his proposed legislation include adding international stores to formula retail restrictions. Currently, if an international store has 11 stores in the U.S., they are already subject to formula retail guidelines. However, Supervisor Mar’s proposal would now mean that any international retailer who wants to open their first U.S. store in San Francisco would also be subject to these guidelines. This has come about because of the proliferation of international stores that have come into San Francisco on busy streets such as Fillmore Street.

What makes this difficult to accept is that these international stores bring new ideas and concepts to the U.S. It fosters the very idea of a startup that we are seeing in technology and they have chosen San Francisco to launch. This restriction would chase them away in favor of other large metropolitan cities and send an "unwelcome" notice to foreign firms that would to do business in San Francisco.

Currently, with the growth of large, high-density apartments throughout the city that have ground floor retail space available these international stores offer new innovative stores that has the financial resources to open in these locations. At a cost of $200.00 per foot on average to build out retail spaces today, the likelihood that mom-and-pop retailers can secure such sites and flourish would be unrealistic.

However, these international stores are not cookie-cutter operations in all major cities in the United States. They are in fact a single store in the U.S. trying to see if their business concept will work in our marketplace. It is the very belief that San Francisco is thriving on today with its technology boom.

Supervisor Mar also wants to expand formula retail to include personal services such as real estate companies, insurance companies, medical related facilities, fitness centers and more. This would mean that every one of these types of services, that have 11 locations or more, would be subject to a major delay in securing a new facility. With a high amount of uncertainty and costs to go through, the formula retail process can easily take six months to a year to complete.

We need to step back and look at what we are doing to ourselves here. What happened to the theory that free enterprise determines who should exist or fail? If a store is not wanted, they will close. If a store is needed, they will be supported and strive. Why do we want to create more red tape and more bureaucracy? More importantly, why would we want the absence of a real decision maker to arbitrate and secure an immediate decision?

San Francisco voters need to be aware of these risks and contact their Supervisors and say we want to support or reject service retailers in our neighborhood by our pocket book, not by a board that is being swayed by interest groups who truly do not represent the average citizen.

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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 29 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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