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As Retail Struggles, So Do San Francisco Property Owners Seeking Ground-Floor Tenants

As Retail Struggles, So Do San Francisco Property Owners Seeking Ground-Floor Tenants
Empty ground-floor retail space in downtown San Francisco

Activating Market Street through new residential developments has not gone as smoothly as San Francisco city officials would have liked. Over the past five years, 20 new housing developments were completed on or a few blocks off Market Street, but 17 vacant ground-floor retail fronts remain, the San Francisco Chronicle reports.

Crescent HeightsNema, a 700-unit apartment complex at 10th and Market streets, has not been able to fill the 13,500 SF of retail. L7, a 410-unit project at 1222 Harrison St., has five vacant storefronts, but signs indicate a furniture store could soon be moving in.

The city requires residential developments to include ground-floor retail, but that is not always an easy feat for developers in a city that encourages more small retail than large chain stores. Many developers have said not all sites are ideal for retail. Developers prefer higher credit tenants that can provide long-term tenancy instead of the newer mom-and-pop businesses neighbors want. Grocery stores have anchored many developments throughout the Bay Area, but they require more space than some of the projects will allow.

Retailer categories such as clothing, shoes and hardware are contracting throughout the country while expanding retailers such as banks, medical services, gymscannabis dispensaries and offices are not popular among neighbors and need authorization from the planning commission, which could take up to a year. Corner stores also are struggling now that new liquor licenses are prohibited in some areas. Liquor sales help with revenue at these stores that sell other goods as well.

Despite the challenges, not all developments have been striking out with retailers. Equity Residential has signed 10 leases across three of its newest complexes — One Henry Adams, 855 Brannan St. and 1010 Potrero — that will bring a mix of cafés, coffee shops, restaurants and artist space to these developments.

Equity Residential Vice President of Development Drew Sullins told the San Francisco Chronicle that retail consultants were part of design and construction and the developer views retail as an amenity, not just a tenant.

“A nice café could very well make the difference between someone deciding to sign a lease in one of our buildings versus going somewhere else,” Sullins told the Chronicle.

San Francisco supervisors Jane Kim and Aaron Peskin are considering ways to pressure developers to fill their empty retail spaces. Kim is considering a tax on vacant space, similar to a move being made in New York City, while Peskin is considering imposing a fee that would be used to maintain the space from trash and for graffiti removal.