Starboard Commercial Real Estate

Hans Hansson | July 15, 2017


Hans Hansson | July 15, 2017

San Francisco’s Mayor, Ed Lee, just announced a $10.1 billion city budget, with increased spending to address homelessness. The two-year budget proposal, which includes a $10 billion budget in the second year, will boost services by $30 million each year around homeless services.

 

Per resident, San Francisco spends more money than any other city in the United States. While the budget was announced, real estate assessment figures showed that property tax revenue will increase by 7.4 percent, due to higher real estate sales transactions paired with higher real estate values.

 

The city is over six months to a year behind in actual reassessments of properties that have sold. Therefore, the actual gain will be much higher when the city finalizes new reassessments.

 

San Francisco is experiencing an unprecedented boom in new income due to increased property values and will continue to do so over for the next two years at least, until all reassessments are complete. Given we are spending the most per resident in the country and given our unprecedented growth in income, are we as residents getting our money’s worth?

 

The Board of Supervisors struggled with approving this $10.1 billion budget because it still requires major cuts in services to obtain a balanced budget. The city continues to spend more money than it receives. How can this continue to be?

 

Discretionary available funds are actually at an all-time low. There are less than $50 million available funds to tackle new projects from infrastructure to assisting the homeless. Almost all the $10.1 billion budget is locked into city wages, benefits, and pension dues. The sad fact is that there is little that can be done about it.  

 

Illinois currently has no state budget because the state owes far more in outstanding bills than it has money to pay. The only difference between us and the state of Illinois is that we are experiencing a real estate boom. If this boom did not occur or eventually busts, our situation is going to be exactly the same as Illinois.

 

It doesn’t take an “eagle’s eye” to question whether we are getting our money’s worth out of this budget. As a native San Franciscan, I see that our streets are dirtier than ever before and are lined with even more homeless people. Countless streets are in desperate need of repair and there is absolutely no discussion amongst city officials to repair our underground infrastructure, namely our 100-year-old plus sewage system along with our electrical and water systems.  

 

So, what is the hold up? First, we have a political problem. We are a one-party town with no political opposition to create a system of checks and balances. Secondly, the very worker’s government, union, and the large corporations that control the city are our politicians, which created these massive financial “giveaways” in terms of wages, benefits and pensions. Therefore, without independent oversight or some political oppositional pressure, there’s no chance that anyone will truly tackle these cost overruns.  

 

Overregulation and inefficiencies are built into the fabric of how we run our government. Again, you don’t need an “eagle’s eye” to see this. Simply go down to San Francisco City Hall and try to pay your taxes, or go to the City Permit department and try to pull a permit for construction. There is no motivation to be efficient because if they were, they simply would not be needed. The sad reality is that we are overstocked with government workers. From the time of Mayor George Moscone to the end of Dianne Feinstein’s term in office as Mayor, the city increased its city worker count by four thousand.

 

Here is an excerpt from a recent San Francisco Chronicle article on our budget.

 

“By far the biggest chunk goes to pay city employees. Almost half — $4.7 billion — is spent on the salaries and benefits of 30,626 city employees. How many workers is that? A little more than the population of Burlingame. Enough to provide one worker for every 28 San Francisco residents. Enough to fill three-quarters of the seats at AT&T Park, which — considering the way the Giants are playing — soon might be a great turnout.

The average San Francisco worker makes $108,774 in salary and $49,864 in benefits, including medical, dental and vision care and pension contributions. An income of $108,774 is just over 150 percent of the median salary in San Francisco.

Of course, San Francisco city salaries vary widely. A starting custodian makes $49,270, and a starting junior typist makes $44,798. That’s far less than the city’s top dogs, including the mayor ($302,400), fire chief ($311,194) and the police chief ($316,732). No wonder acting Police Chief Toney Chaplin wants the job full time.”

So, a city worker makes over 150 percent more than the average worker in the city? Yet, is the efficiency there? If not, can you reorganize these departments and can you create some mechanisms that tout servicing the citizens of the city first before worrying about job retention?

 

There is no way to fix this system if the politicians are controlled by the very workers and special interests that benefit from this budget.

 

Illinois is a very sad example that can easily happen here. We need government leaders with a backbone to see what is coming and find out a way to fix it before it’s too late.

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Hans Hansson | July 10, 2017

Several years ago, I experienced my first case of age discrimination. My son and colleague invited me to assist him in a large sales presentation. This tech firm was looking to move about 100 people into new offices.  As we sat waiting to make the presentation, a young woman came in by herself to start the meeting.  My first question I asked her was, “Who will be the decision maker managing this move?”. She responded that she would be.  My next question was about how long she had been with the firm, and she responded, “Three weeks.” I then asked her if she had ever moved an office before. She said, “No.”

 

At this stage, I knew I had to be very careful on how we delivered our presentation. I did not want to appear as though I was lecturing her on the market, much like a father would. Rather, I wanted to be perceived as her partner in the process and provide her with strategic direction based on our expertise. She indicated that she was looking for 10,000 square feet in total space at a price that was at least 20 percent below market. She also wanted an office in the most competitive blocks of San Francisco.

 

I tried to carefully explain to her the guidelines of how much space she would need for the number of employees they have and plan to have, as well as set expectations on the rent they should expect to pay. It did not take long before she began to ignore me and turned the whole conversation to my son (who was in his twenties at the time) to answer.

 

By the end of the meeting, we knew we didn’t win the business. My son looked at me as we were walking out and said, “Dad, you really blew that one.”

 

The prospect ended up hiring a rookie agent with no experience who took the amount of square footage I had recommended at a rent that was at-market rate in an area very different than what she was originally wanting.  

 

As a “Baby Boomer” and much like any generation, we feel we know more than the previous generation and certainly question their way of doing things.

 

However, when we were younger, we also knew and respected that experience mattered. We looked up to people in the business, particularly in our own line of work who had achieved great success over their careers. We wanted to become just like them. There was respect and also trust in our older colleagues.  We felt we could introduce things to improve the status quo.

 

In my eyes, I see today’s generation wanting to be disrupters, and blow up what we’ve been doing to start with an entirely new concept.

 

Starting out in my career, I was always trying to improve the situation and educate a potential client. Instead, this particular prospect was not looking to be educated. She was looking for someone to find exactly what she requested.

 

I’m sure the agent she had hired showed her spaces she was looking for, and his or her superiors at the firm decided to look into alternatives that better suited her needs.

 

In the end, I was wrong in not properly handling the situation. I should have realized my audience and showed her the spaces she was looking for, let her come to the conclusion that perhaps it wasn’t the best fit, and then direct her to alterative properties.

 

The challenge for salespeople today is that with all the data, product, and service information available at anyone’s finger tips––what are we going to do to continue to exist and be of value?

 

We as salespeople need to become the “trusted advisors.” We cannot rely strictly on information anymore. We need to take the information we have and create a strategy to survive. This is something, at least for now, that technology can’t do quite as well yet. The real question/challenge is––will the Millennial generation allow Baby Boomers to advise? Or will they just ignore us?

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Hans Hansson | July 5, 2017

 

I recently attended an event organized by National Association of Realtors (NAR). Attending guests included senior board members from across the country. As I presented in cities large and small, I have quickly come to learn that there is a national shortage of both residential and industrial real estate.

The Supply Doesn’t Meet Demand

There is clearly a major population shift occurring from outer suburbs to inner cities. Cities from Amarillo to Cleveland are seeing changes in city-dwellers’ living habits, which create a real need for more urban development, particularly urban condos. Although development is happening, it’s not happening quick enough to supply the demand, therefore pricing has become unaffordable throughout the country.

Affordable housing was the center stage topic of the NAR convention.  Cities like Detroit are seeing major development throughout the city, but it’s not growing fast enough to gentrify areas caught in the middle of high crime areas. This results in high-crime neighborhoods surrounding the new development.

Not Enough Warehouses

The next area of shortages in Industrial or warehouse properties. Because rental rates have not kept pace with overall development costs, this type of property has been out of favor for new development for quite some time. Now, shortage exists everywhere, creating real challenges for businesses seeking to expand in their marketplace.  

For example, Napa Valley's industrial warehouse vacancies are now at 1.3 percent. Yes, with the expanding wine industry, businesses are finding themselves choked off for growth because they don’t have enough warehouse space to store their product.

In Hayward, where the industrial vacancy is only one percent, small to big businesses can’t find any warehouse space available because none have been developed for so long.

The challenge with these shortages rest in the length of time it takes from acquisition to permitting to the actual building process.  All markets are experiencing long delays in securing permits, thereby creating more pressure on shortages in the marketplace.

So, what’s going on? Clearly, we are seeing continued growth in our economy, but typically housing shortages are caused by population, not economic growth.

Lifestyle Changes Force Industry Changes

One fact that I was discussed that I would never have guessed is the size of the millennial generation. I assumed incorrectly that the Baby Boomers still represent the largest population block. However, that is not the case. Today, there are roughly around 60 million baby boomers, but over 100 million Millennials– making Millennials the winner of the market share. As we continue to develop, it’s important to keep in mind what Millennials want.

 

According to a recent study from the Urban Land Institute, Millennials identify themselves with the following words: entitlement, connection, ambition and innovation. Each of these words directly correlate with the lifestyle and real estate Millennials demand.

Convenience is a top priority for urban Millennials on the house hunt, and residential mixed-use spaces are a part of the solution to address their needs. Crucial needs for living space includes walkable distance to public transportation, amenities such as an at-home gym, nearby dining and entertainment. As population density in urban areas continue to climb, it’s important that cities develop properties that the bulk of the market would be interested in investing in.

 

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Hans Hansson | June 19, 2017

 

Asking our government to be proactive may seem like a long shot, but the City leaders across the country need to understand the impact of the changing retail landscape and start to plan ahead for their communities.

Retail buildings generate the highest tax base for cities that rely on property taxes. They also generate the most sales tax and gross receipts tax revenue. Retail is the largest supporting anchor to any city’s revitalization plans and without it, there is nothing to draw people to continue to visit, live, or support any other businesses in the city.

A revolution is taking place and the effects are becoming more noticeable by the day. Retail giants like Amazon have clearly become the first choice for purchasing almost anything at the determent of brick-and-mortar stores. Sears and JC Penny’s are on their last leg in the retail world, while Macy’s and Nordstrom are not far behind. The days of the large department stores are coming to an end and big box retailers could be next. 

Target and Wal-Mart are also clearly seeing online competition take its toll on their bottom line, but still strive to make changes in their offerings to adapt to the ecommerce world. Both retailers have been testing online food ordering this year as a way to stay in the game.  Food is still one of the least underdeveloped areas for e-commerce.

At the recent ICSC convention in Vegas, it’s apparent that the majority of shopping centers throughout the US in the next 15-years will be closed. Many shopping centers have already converted to large-scale food courts. However, food retail is also feeling the effect of the changing eating habits of the millennial. Customers under the age of 35 are no longer interested in high-end, sit-down restaurants, nor are they interested in the fast food chains like Applebee’s or Buffalo Wild Wings. Both are struggling to compete with the likes of Chipotle and Panera Breads, which are expanding while the rest of the competition are shutting down. Customers in this age group are more likely to order takeout or cook at home to eat.

This has already had a rippling effect particularly in shopping centers that have food chain anchors. Shopping centers like The Westfield Mall in San Francisco have seen the majority of surrounding high-end restaurants close while fast food joints like Panda Express have seen record numbers since they opened in the same mall.

Most shopping centers rely on anchors like Panda Express to feed foot traffic and sales to the smaller surrounding shops, who pay true market-rate rents to be there. anchor stores typically pay little to no rent since they help draw the bulk of customer traffic. As large anchors begin to fail, the entire shopping center will struggle, unless they can find an anchor replacement.

The challenge to communities is what to do with retail zoned buildings that fail. Zoning laws are next to impossible to change quickly and in a lot of cities restrictions on types of retail, changes to other uses such as office, medical, residential are also restricted.

In San Francisco, a brand-new shopping center opened its doors recently, located on the 900 block of Market Street. It’s the biggest and most ambitious retail development in San Francisco since the Westfield shopping center and cost $150 million to build.
 
The center was built to compete with the Westfield shopping center, located down the street, but due to the changing retail market, the building has been unable to secure tenants who are willing to pay the necessary rent to make the costs of the project economically viable. 

Interestingly, this project was originally built as retail as the Kress department store. When the urban market retail began to lose favor over the new regional suburb of shopping centers, it closed for a number of years.  A developer in the early 1980’s eventually converted the building to ground floor retail and offices above successfully. But during the down turn of 2009, it fell on hard times until the current developer bought it and converted it to retail when market street booming again with customers.

The reality is that this building should once again become an office building. The floor plates lend itself well to support the types of office space that tech firms like Airbnb and Facebook are looking for in the city. Yet, to convert the building back to office space (if it would even get approved) would take at least two years through the planning department. This would mean two years of a vacant building in an area that has been posed to seen massive changes with the added residential development planned all around this building.

City officials and developers need to wake up fast to these rapid changes and begin determining what steps can be taken and what product type should be supported in these ever-changing times. The good news is that buildings are still needed and will always be needed. But the bad news is that government leaders lead from behind and not from the front. By doing so, this could lead to the next real great economic collapse.

Photo Credit: Phillip Pessar Flickr via Compfight cc


Hans Hansson | May 19, 2017

Industrial SpaceToday, office vacancy throughout the Bay Area is on average at five percent. Planned office development is taking place in San Francisco, San Jose, and Oakland to meet the office market demands. Retail vacancy is also around six percent. We still see new retail projects underway, while larger retailers across the country continue to close their brick-and-mortar stores and try to find new ways to survive in the ecommerce marketplace.

However, the lowest vacancy factor in all available commercial real estate sectors is industrial. Today, the overall industrial vacancy rates are at around three percent. In industrial heavy markets like Hayward, the overall vacancy is under two percent. Yet, there are almost no industrial projects in progress to address.

As a commercial real estate firm, the highest requested space that we receive inquiries on is for 10,000-20,000 square feet of warehouse space in the Hayward market. Unfortunately, it simply does not exist.

Even more challenging is that our warehouse market overall is old and obsolete. For instance, in San Francisco, there has not been a large warehouse industrial project built since the 1980's. Most of our warehouse stock was built before and during World War II to address the need of building navy ships. Most warehouse units are underpowered and cannot address the needs of today's offices that are typically included with warehouse space. Today's industrial space calls for power, sprinkler systems, high ceilings, and the ability to stack three-four palates on top of one another. Properties with this checklist are almost non-existent.

Why then do developers not build warehouse space? The first reason is leasing costs. Warehouse tenants often have a lot smaller budget to work with. Therefore, the cost to acquire land and make economic sense of the development is challenging. The second reason deals with return on investment for developers. Warehouse space requires access for large trucks and requires larger parking areas. This requires more common area land that developers need to include in their planning, which means they will need to buy land at a much lower cost to accommodate– which is not easy to find.

If we do not develop warehouse and industrial space, we will face even more congestion on our freeways, as trucks will have to venture farther away into the central valley to bring in goods to the Bay Area.

Zoning restrictions have been implemented in Bay Area cities, including San Francisco, to try to force development of more warehouse space. However, in the end, land is simply too expensive and the process to get a project up and running will take years since all projects must go through the planning process (typically up to two years from start date). Without a regional approach from our government officials to support our need for more warehouse and industrial property, we risk impeding our economic growth.

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Hans Hansson | May 16, 2017

The Marathon Called SalesWatching the Golden State Warriors is a true testament to greatness. This team not only has individual star players, but an outstanding team overall with selflessness to share responsibilities on the court and ensure the team sustains their objective to win.


To achieve greatness in any competitive sport, you must perfect your skills, learn to work with others, concentrate on your goals and dig deep when things get tough so that you can find a way to get back on the winning track.


Sports championships are a lot like running a marathon. When the season starts, you and your team must learn how to pace yourself for the grueling games ahead, knowing that each game counts towards your eventual placement in the standings. It's important to remain consistent and challenge yourself every game to be as great as you can be.


In longer sport seasons, compliancy does set in at all levels from youth to professional sports. The ability to play lots of games with the same focus and energy throughout a season is extremely tough. Things happen. Athletes get tired, emotionally distraught from personal matters, or injured– which can take away the ability to remain "great."


Last year, Stephen Curry fell into the stands in an early playoff game and seemed to disappear as a factor throughout the remaining playoffs. News was that Stephen was fine, however his results were no longer there. Even the greatest fall from grace due to things often out of their control.


A successful sales career is also much like a long-distance marathon. The ultimate prize may not be a trophy, but it involves an everyday commitment to excellence to win their personal "brass ring." The sales people who have achieved success can easily fall victim to being too comfortable. They may allow age, exhaustion, or emotion to gradually drop their production level. To be a top salesman, time over time, year after year, requires a long view of addressing the tools and skillsets that not only you need to develop and maintain, but do so throughout one's career.


Great salespeople share all the characteristics of great sports figures. Champions of sales know that they are only as good as the last deal they closed. In basketball, players are only as good as their last basket. No one knows for sure when either will occur again. One accident or a missed step could end their careers quickly.


I had a chance to speak to Vida Blue former Oakland A and San Francisco Giant's great. I asked him if he saw parallels in his career as a pitcher with Tim Lincecum's career, who at the time was facing his last year with the Giants. Both had amazing fast balls that disappeared. Vida could learn how to pitch instead of just learning to throw and continued to succeed at a high level. Lincecum lost his fast ball lost in command and his baseball career ended.
Vida explained that his era was much different than Lincecum's. Vida was always one pitch away from an injury that could end his career, one young pitcher away from stealing his position as a starter. Also, salaries did not protect players who started to fade. If you were out, you were on the street usually with little financial resources. In Lincecum's era, the big paydays protected him from the exit door, at least for a while. Each team held hope for a recovery long after it was possible because they had such a financial investment in him. Lincecum's career lasted at least three years longer than it would have during Vida's time simply because of the costs to admit that Lincecum's career was over.


Sales Champions face the same struggles. Recently we interviewed one of the top salesperson in the country during the 80's and 90's. Now, very late in his career, things happened in his life that requires him to come up to "bat" one more time. His skillsets are still there, but severely reduced from his top-level clip. His worst performance now would still be better than most salespeople in his field, but he is no longer a sales champion.


He ran his long-distance marathon in sales and finished first. Now, he wants to start a new race but will be faced with many challenges that will make it hard for him to win again.


If all salespeople remember to pace themselves, monitor their results regularly, and continue to push themselves every day, they too can win their long-distance race.


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Hans Hansson | April 24, 2017

Shopping CenterIn the 1950's, President Eisenhower launched the development of our national freeway system. This lead to the development of our suburbs and major urban cities throughout the United States. Shopping centers where created around this time and became an alternative to outdoor downtown malls.

Shopping Centers were built with typically two to three anchor tenants like a Sears, Macys or a JC Penny's. They typically paid little to no rent in favor of drawing traffic to the smaller retailers that paid high rent to be near the retail giants. At this time, it was the smaller retailers that made the shopping centers profitable.

Today, we see all major retailers are struggling to survive. Sears and JC Penney are at the end of their lifecycles, with Macy's not too far behind. These retailers in American malls are challenged with an oversupply of retail space as customers continue to rapidly migrate to online shopping, as well as fast fashion retailers like H&M and off-price stores such as T.J. Maxx.

As a result, about 400 of the country's 1,100 enclosed malls will fail in the upcoming years. As shopping centers lose large retail anchors, with no comparable prospects to replace them, it's only a matter of time before the smaller surrounding retailers also die out from losing shopper foot traffic.

Retail analyst, Jan Kniffen shared that about one-third of malls in the U.S. will shut their doors in the coming years. These vacant spaces will create large blocks of abandoned real estate that will take its toll on surrounding areas within urban cities and suburbs.

Developers and current owners of shopping centers are working to reinvent themselves quickly and appeal to a different demographic – the Millennials. Those born between 1982 and 2002 are living very different lives than previous generations, therefore have different needs and desires.

Millennials will typically not cook at home, yet seek healthier meals and fun ways to stay fit. They also remain single much longer while waiting to have kids. Thus, several shopping centers across the U.S. are starting to convert a portion of their space for residential use, while keeping retail on the ground level– housing convenient yet healthy food options and trendy fitness studios like Soul Cycle and Barry's Bootcamp.

In addition, collective shopping centers, also known as "emporiums" are back where a large warehouse space is divided into smaller micro-stores, selling food, art, clothes, furniture, and more. "The Mix" for example in Southern California is a current success story of this rising model.

Shopping center owners are also marketing to shoppers that they sell "anything that can't be found on Amazon." Stores like Nordstrom's and Petco are also offering "delivery pick-ups" within their store to support their own online sales. The ever-growing ecommerce giant, Amazon, is rumored to be testing a grocery store concept that would allow deliveries to come out of their brick-and-mortar stores.

We are entering a crossroads generationally that is causing retailers to question long-term strategies. The last of the baby boomers are now entering their 60's. They have the financial resources but many find they have everything they need and are not spending like previous generations that hit the later years and would like to reward their life efforts with luxuries.

The Millennials tend to want it all, without putting in as much work. Quality is less important than fast, cheap, and interesting. A step down in appearance is a death sentence for any men and womens apparel stores. Even "middle of the road" retailers such as the Men's Warehouse have been forced to slash prices of suits and traditional wear so low that the whole quality appearance of their suits is compromised.

Although it's inevitable that malls will be converted to new uses over time, city zoning regulations could impede the reconstruction of these sites, leaving cities and suburbs with major holes that could lead to blight. For example, in Reno there is a major economically valued street with a large shopping center that closed five years ago. The center was left abandoned and then demolished, leaving a major street with a large vacant lot surrounded by other retailers which are also quickly dying out.

The next generation of retailers will emerge and bring about very different ideas. But one thing remains certain– our local governments need to be able to streamline their ability to respond to developers and current shopping centers quickly when approached with new ideas. If they can't respond in a timely manner, there will be serious financial consequences.

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Hans Hansson | April 11, 2017

Time is money"Time is money" sums up the concept of opportunity cost – because time is money. It means time is a valuable resource (because our time in this world is finite), therefore it's better to do things efficiently. Alternatively, spend time and effort on things that get the results you are looking for.

Starboard TCN recently moved offices across the street from the building we worked in for over 12 years. The buildings are very similar, yet still different in key ways. In the new building, I no longer need to cross the busy traffic on Market Street. Instead, I can walk from the underground exit to the building entrance. In our old office, I would typically stop to talk to the building security guard for and discuss the latest sports news. Now, I just enter my building and take a sharp left straight to the elevator.

My old elevator stopped virtually on every floor before I made it to my office on the fourteenth floor. My new elevator now has "express control" so I rarely share the elevator and I zip straight up to the sixteenth floor, without any stops. When I leave the building, instead of going around the block to enter the underground train station, I now have a direct path from the new building to the entrance. As a commercial real estate broker, I typically use the underground at least four times a day, so this new location is very convenient.

If you add up all the time I'm now saving just by moving to a new office location, it's about an hour a day. That's five hours a week, 20 hours a month, and over 260 hours in one year.

As a salesperson, particularly if you work on commission, it's crucial to figure out how much money you will need to make in an hour in order to hit your financial annual goal. Assuming you want to make $200,000 and you work 40 hours a week, you would have to earn $96.00 an hour in order to achieve that goal.

Before the office move, I was losing five hours a week, which means at the time I was really only working 35 hours a week. Using the same $200,000 annual goal, instead of needing to earn $96.00, I now need to earn $109.00 an hour to achieve my goal. However, if you continue to work towards $96.00 an hour, you would earn $175,000 instead of $200,000 – a loss of $25,000 in annual income.

What's really interesting to me is that it was not my intent to move our office in order to save time. But what if I studied the effect of time savings or loss of time to determine our move? As one person saving that amount of time in a firm of 20, what is the potential gain for the company if each of our agents were expected to make $200,000 annually and they each saved five hours a week?

If you study your daily routine, like my daily chat with the security guard, making personal calls, or checking social media during the day, you will likely find the precious time needed that could be added back in your work day, increasing efficiency and overall productivity. All of us, whether we are successful or not, should take note that one of the easiest ways to improve your production is to study your daily habits.

Write down all of the activities and note an average time for each. Then study these numbers and see what you can eliminate or change to become more efficient. You might just find a spare $25,000 at the end of the year.

Photo Credit: Delwin Steven Campbell Flickr via Compfight cc


Hans Hansson | April 7, 2017

Permit Delays in San FranciscoI was recently handling a retail listing in the Sunset District in San Francisco that had been vacant for over a year before I took over the listing. The owners said the space received interest, but could not secure a tenant.

The space was previously rented to a title company, but when I took over the listing, the only interest I could secure was from businesses that involved some type of food-use. All over San Francisco's districts, but particularly the Sunset district, there are either moratorium of additional food uses or a requirement that food uses need a variance from the city before a permit can be issued.

In my client's case, I secured an offer from a couple that wanted to open a Taqueria. The tenant had worked in her family's Taqueria for years and decided she wanted to open one of her own. This was a very typical "mom and pop" business. They had just enough funds to do some required improvements and get the business up and running. This couple didn't have prior experience or knowledge of dealing with the city's permit process and didn't realize the length of time it would take to secure the necessary permits before they could open their doors and start making money.

I recommended that they first secure an architect who could handle not only designing the restaurant, but also address the requirements from the city that they will need to pass. The essential cost would be around $5,000. My client confirmed that although the proposed Taqueria was of legal use for the premises, that the variance process would take them a minimum of 4-6 months before they could even know if they will be accepted. The variance requires a posting and a notice circulated to the neighborhood, plus a hearing to determine if there is any neighborhood opposition to this use.

The tenant was clueless to this process and the costs associated with getting approval through the variance was unknown until they could learn if any neighborhood opposition existed.

The landlord was willing to wait four months before he would expect rent, however once permits are secured, the build out alone would take another four months.

The tenant was very excited about the possibility of opening their own Taqueria. After tasting their food and her reviewing her business plan, I believe they would have been a very successful business. Unfortunately, the couple decided to pull out of the deal and the space remained vacant for another six months until the owner decided to take the space back himself and put his own restaurant in there. The process took another year before the owner secured the necessary variance and built out the space. It took another 18 months before the neighborhood saw a vacancy released.

In this case, there was only one vacancy on the block. However, we see many blocks throughout the city with numerous vacancies on one block. Vacant spaces are detrimental to any neighborhood. They lead to foot traffic gaps, which impact neighboring businesses, taking away potential sales.

The challenge is that the city's authorities know this is a problem– our mayor, board of supervisors, neighborhood groups, and the Chamber of Commerce. All receive the same complaints, express sympathy, yet there is still no action.

Retail is being threatened with the competition of online stores, and continuously challenged with high costs of labor, lack of labor, rising delivery costs, and the lack of customers– which is a result of the lack of foot traffic that once populated retail blocks. We need leadership to take charge and streamline the permit process before all our neighborhoods fall into blight.

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