Starboard Commercial Real Estate

Hans Hansson | September 11, 2018

In 1984 when I got into the commercial real estate business, San Francisco had a vibrant garment production business, commonly known as “sweatshops.” Long before the sewing business was sent overseas, most of today’s South of Market was dominated by sweatshops.  These industrial spaces were packed with rows and rows of sewing machines, with one person sitting at each.  These spaces had concrete floors, exposed ceilings with drop down lights, full kitchen and rest areas.  Employees at these offices spent long hours working at their stations, and company owners would offer everything to keep their workers onsite throughout the day. 


 


Today’s tech firms are really yesterday’s version of sweatshops.  They offer rows of long desks with computers, instead of sewing machines. Tech offices are typically in wide open industrially designed spaces with concrete floors and exposed ceilings. Offices offer full kitchens and common areas along with a concierge of services provided by the employer to keep their workers longer at the office and maximize productivity. 


 


The challenge that strikes as a result of this trend is that employees barely leave their office for lunch or breaks, and in turn hurt sales of surrounding restaurants and retail stores. 


 


Restaurants are already struggling with higher labor costs since minimum wages went up to $15.00 an hour just last month. Tech firm amenities, mandated city regulations, and high cost of build outs are leaving San Francisco restaurant owners no choice but to close.  


 


For example, Umbria is an Italian restaurant on the corner of 2nd and Howard. It was a very successful restaurant for over twenty years, until LinkedIn moved their headquarters into the new building across the street. The landlord of Umbria’s lease had expected Umbria’s sales to raise, so they raised their rent when the lease expired. Unfortunately for Umbria, instead of seeing an increase in business, they saw a decline by 1/3 when LinkedIn opened their doors.  LinkedIn, as most tech firms do, offered employees a full kitchen with catered lunch. Umbria simply could not make money and ultimately closed its doors.  


 


As a result, San Francisco City officials are reviewing office kitchens and concierge services. If passed, it would adjust zoning laws to ban new construction of on-site workplace cafeterias. 


 


During the sweatshops era, virtually no retailers existed around them since their workers were not allowed to leave the premises.  Today’s modern offices are essentially doing the same thing to retailers, except there’s no enforcement, with employers offering top notch food benefits and services that outside retailers cannot compete against. 



Photo Credit: eSeL.at Flickr via Compfight cc
Posted 2 months, 5 days ago on September 11, 2018
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