San Francisco Needs to Act Now to Save Retail
May 27, 2020
San Francisco is beginning to lose its core neighborhood and downtown retailers at a rapid pace. Two local brands– Specialties and The Grove– are closing their doors. More are coming. If San Francisco does not create a game plan to address these closures quickly, San Francisco’s neighborhood retail could be harmed for years with little chance of a recovery. This will create blight and will lead to an overall downgrade of our entire city.
Here are key issues:
1) If a store closes, it would take years to replace the tenant. With the nuances of the city’s permitting process, the requirements set by Americans with Disabilities Act (ADA) which would require upgrades to a space– you’re looking at two to three years. When the market does return, the permit department will be under water and backlogged. Any retailer in need of a permit will have to wait even longer.
2) When retailers reopen, there will still be restrictions. Social distancing requirements are going to force retailers to use less of their spaces, and allow less people in at once. This will have a negative impact on business in an already trying times.
3) Rent likely won’t be paid for a while. Retailers will not be able to afford market rate rent for a while until things go back to normal and they can operate as usual. The costs of restocking is going to be costly, let alone training new staff as current employees leave.
4) Smaller retailers live off the traffic created by big retailers. The loss of a Walgreens in a neighborhood or a larger restaurant will take a toll on the smaller retailers in the surrounding area.
Here is what the City needs to do now:
The city needs to put in place an emergency streamlining of the permit process. In addition, it needs to delay the implementation of our new ADA compliance regulations along with other upgrades triggered by a change of use. Formula retail and other restrictions should be temporarily eliminated in order to allow larger retailers easier access to current and future vacant stores of 5,000 square feet or more.
Restaurants should be allowed a temporary use of public sidewalks for outdoor dining in order to address the loss of table space required to meet social distancing rules.
Parking Meters and Yellow zones
Parking meters should not be enforced for at least the next six months in order to support drive up, pick up and deliveries. Parking should be allowed in yellow zones during peak business hours, and deliveries should be encouraged early morning until 10:00am.
Rent Concession and Property Tax Reduction
The city should work with landlords to create an incentive program in order to keep our retailers. The city should encourage landlords to agree to rent model based on 8 percent of gross sales for a period of six months to a year. As an offset, the city should offer the landlord a property tax reduction for rent loss.
City SBA Program
The city should offer low interest loans to businesses to be used for restocking stores under 5,000 square feet. Restaurants are going to be particularly hit hard because most will have to restock their entire restaurant from scratch.
The city must eliminate formula retail restrictions and expediate permits for one year in order to allow large retailers to consider 5,000 square foot or larger spaces in our neighborhoods.
We cannot wait until we reopen. Mayor London Breed and the Board of Supervisors need to act NOW. If not, we will have a disaster on our hands that will change to city forever.
Written by: Hans Hansson
Hans Hansson is President of Starboard Commercial Real Estate. Hans has been an active broker for over 35 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, hanshansson.com.