An Open Letter To Mayor London Breed About Zoning Reform

Dear Mayor Breed,

I just attended the National Association of Realtors (NAR) convention at San Francisco’s Moscone Center last week. While I was there, I met many people who shared with me their reservations about visiting our city because of what they heard on the news about the growing homeless population and increasing crime. 

I was shocked to hear this, since I’m usually accustomed to hearing from visitors, “What a beautiful city you get to live in!” My commercial real estate friends pointed out how many vacant retail spaces they see. They didn’t understand how this could be, given how strong our commercial market is compared to other parts of the country. They also pointed out that they kept seeing homeless people set up for long-term stay within the entrances and doorsteps of the empty stores.

As you are aware, our city has tried to address the change of our neighborhoods when “big business” tenants move in. There have been concerns from locals about having too many client service-based businesses in one area, which creates an inconsistent flow of retail customers, ultimately hurting the local businesses. 

To prevent this, San Francisco passed what is now called formula retail rules. These strict regulations are preventing our businesses from flourishing. For example, the rules state that if a store has more than 11 locations anywhere in the U.S., then the business has to go through a separate public review process, which on average takes at least one year to complete.

In the industrial part of town, we see local commercial tenants – from artists to long time service providers – pushed out by the wave of new technology companies willing to pay high cost leases. 

As a result, the city passed even more zoning regulations to prevent more loss of business and enforcing illegal change of use. As our city’s zoning laws continue to pile on, the city has also made changes to our transit system by implementing permanent bike lanes throughout the city, changing traffic lanes, expanding sidewalks and adding more parking restrictions. These changes have directly impacted businesses, particularly those leasing warehouse buildings, making it difficult to properly access them for daily deliveries. Under the current zoning laws, these industrial buildings are becoming wasted space. 

I understand that our city officials mean well, but whenever they receive public complaints, they react with “quick fixes” rather than looking at the bigger picture to see the potential chain reaction of certain outcomes. 

Have our challenges ever been reviewed on a regular basis in order to determine their impact – good or bad? Since its inception, has formula retail in addition to all of the other restrictions actually helped our retail communities? 

From looking purely at the vacancy rates, the answer is no. In 2015, the overall vacancy in the neighborhoods was six percent. Today it’s 19.7 percent, and it’s scheduled to balloon to 23 percent in 2021. We are in the midst of one of the best economic cycles we’ve ever had, so how can this be?

In SOMA, the overall vacancy rate for office space is under five percent, yet PDR and service-related buildings are at 13.5 percent, with most of the vacancies located on the ground floor. Since offices are now allowed to fill those spaces, these areas do not have enough pedestrian traffic to support the businesses that are open. If some of these restrictions do not lift, many of these ground floor retail spaces will remain empty for years to come. 

Unfortunately, I understand that the process to undo these zoning changes may take a very long time. I urge you, as our Mayor, to demand an emergency discussion that includes all businesses to participate. Real Estate brokers, such as I, and the Chamber Building Owners, must also be included in the process. We, too, want to see the city grow and prosper for all. I ask you to please take a public charge and address these zoning issues immediately. Or else, our city will continue down this spiraling path, taking out local businesses with it.

Hans Hansson
Starboard TCN