San Francisco's retail vacancy problem has become a source of persistent blight in the neighborhoods of North Beach and Castro over the last five years. But with so many well-off residents and a booming local economy, why are so many blocks in two of SF's most vibrant neighborhoods for tourism, food, and nightlife filled with boarded-up or darkened storefronts?
The issue doesn't have just a single source, and as with all things real estate in this town, it's complicated. But the trend is a disturbing one for residents of the Castro and North Beach who are tired of blocks that are half-dead, and tired of seeing once bustling streets go quiet.
The Board of Supervisors has taken note, and in January, Sup. Aaron Peskin announced his intention to get a proposition on the November ballot that would impose a tax on landlords who leave retail spaces empty longer than six months. The proposed "vacancy tax" would be $250 per day after six months of retail vacancy, but as the director of pro-development group YIMBY Action, Laura Foote, said to the Examiner, enforcement will be the biggest issue with the tax. "How will we be able to establish whether it is occupied?" Foote asked, pointing out that spaces don't always become occupied quickly after a lease is signed.
The city already has a five-year-old ordinance requiring that retail vacancies be registered with with the city, but that has been a complete failure of enforcement. As Hoodline reported earlier this month, as Sup. Sandra Lee Fewer looked to address vacancies in the Richmond by doubling down on this "vacancy census idea" with new legislation, only 40 vacancies are currently on the city's rolls, while the actual number is likely in the thousands.
So are greedy landlords most to blame for the current glut of "For Lease" signs? Below, SFist breaks down the four main factors that seem to be contributing to this years-long trend.
1. Asking rents are too high, and/or deal terms being sought by landlords are too onerous. "A lot of [landlords] have unrealistic goals as to what the value of the property is," says Daniel Bergerac speaking to Hoodline. Bergerac is a Castro business owner and the outgoing president of the Castro Merchants association, and he suggests that in the current retail environment, local landlords seem to want too much out of their properties — and holding out for tenants who can pay instead of lowering the asking rent is leaving more properties empty longer. One example is the Zapata Taqueria space at 18th and Collingwood — it closed in 2017 after the tenants failed to reach a long-term deal with notorious local landlord Les Natali (who infamously left the Patio Cafe/Hamburger Mary's space vacant for over 15 years). It remains empty and has been advertised ever since as a taqueria space.
2. Absentee landlords have no personal investment in the neighborhoods themselves. As Bergerac told Hoodline of Castro area landlords, "Many of them, you can't get ahold of. They don't have the same ties to the neighborhood that their grandparents may have had when they originally bought the property." That lack of personal connection to the Castro — and this is likely true in North Beach as well — means the landlords aren't seeing the depressive effects of papered-over windows and have no incentive to lower prices in order to more quickly reactivate ground-floor spaces.
3. Formula retail rules keep high-paying chains out of the running. Both the Castro and North Beach have strict rules barring chain stores or restaurants from moving in (more about those rules here). Even if it is a local chain, if it has more than 11 locations it has to undertake an onerous conditional-use permitting process and face the ire of neighborhood merchants at public meetings. But this means that instead of competition from chains, local store and restaurant owners have to deal with the blight of empty storefronts when small mom-and-pops can't pay top-dollar rents. And while many San Franciscans, including myself, value the preservation of a neighborhood's character — and our formula retail rules are responsible for the eclectic and popular home-grown retail strips of Hayes Valley and Valencia Street — it means that North Beach doesn't have a functional grocery store, and the Castro can't have a Mixt or a Krispy Kreme Donuts. It also means uphill battles for super-popular brands that could be "anchor tenants" and draw foot traffic to the area that benefits everyone. I know this is a topic people get passionate about, but there's room for debate about how exceptions get made.
4. Millennials and other new residents in SF neighborhoods don't leave their apartments to eat, shop, or meet people. Retail is having a reckoning nationwide because of this one, as Netflix, Instacart, Amazon, Caviar, UberEats, Grindr, Bumble, and Tinder have made staying in much easier and more entertaining. Restaurants may be benefiting decently from delivery-app business, but the lack of people physically on the street means less cross-pollination for bookstores, clothing stores, and other small retail shops that rely on foot traffic.
5. Homelessness continues to intimidate pedestrians and create other impediments for retail. Homelessness is an enormous problem that effects every city on the West Coast, and many other cities nationwide. The Castro only became one of San Francisco's local gathering nodes for the homeless in the last decade, and Bergerac says it is the number one complaint among neighborhood residents. He also says that he thinks the Castro used to be more of a magnet for younger homeless "travelers," but now "we've shifted more towards chronically homeless people with mental health issues." Small encampments or people sleeping in doorways occur with greater ease the more vacant storefronts there are, and the quieter a street becomes, creating a vicious cycle.
[Update: The Chronicle's Phil Matier chimed in following this story, and added the pertinent (sixth) reason for so many retail vacancies in the Castro in particular: the city's very slow conditional-use approval process. According an early March report by the city's Budget and Legislative Analyst's office, commissioned by Supervisor Rafael Mandelman, getting a conditional use authorization change approved by the Planning Department for the Castro/Upper Market neighborhood takes, on average, a full year. Add to that building permits, construction time, and inspections, and this is a massive burden for small business owners who have already begun paying rent in many cases.]
The city's western neighborhoods suffer their own share of vacancies, which is why Supervisor Fewer introduced her legislation about the vacancy registry. Late last year, former Sunset District supervisor Katy Tang introduced and helped pass her own retail legislation easing restrictions on retail businesses relocating or sharing locations — like a bookstore that's a co-tenant with a bar — for certain SF districts.
The Frisc spoke with multiple North Beach business owners back in November, and the general consensus seemed to be that creativity will be key moving forward. (Staying open late, for instance, will help capture foot traffic from nightlife in both the Castro and North Beach.) Also, residents have to start putting their money where their mouth is — if you want only local businesses in your neighborhood, and you oppose chains, why are you spending all your money on Amazon and staying in every night?
Related: What We Talk About When We Talk About Formula Retail [SFist]
Photo by Thomas Hawk