By Meghan Hall
Consisting of boutique retailers, high-end restaurants and trendy lounges and entertainment, the Fillmore Street corridor in San Francisco’s Pacific Heights neighborhood is one of the most desirable in the city — for both business tenants and residents. With strong fundamentals in the district, San Francisco-based Prado Group is marketing its 7,375 square foot mixed-use property at 2208 Fillmore for sale. The property, which includes 4,500 square feet of retail space and two residential units at 1,427 square feet each, hit the market in March 2019.
CBRE’s Capital Markets Team is marketing the property on behalf of Prado Group, which represents a unique opportunity for investors in the city of San Francisco, according to Kyle Kovac, executive vice president at CBRE.
“Opportunities to acquire high-quality real estate along the Fillmore Corridor are extremely rare — in particular for mixed use product,” said Kovac about the neighborhood market.
Currently, the property’s retail tenants include Eileen Fisher, who has been located at the property since 2005, Illesteva, an independently-owned eyewear brand, and La Mediterranee. Like Eileen Fisher, La Mediterranee has been at the property for some time, since 2008, and has built up a popular following in the city, consistently earning awards for “Best Mediterranean” and “Best Middle Eastern” in the San Francisco Bay Area. The property, according to a brochure released by CBRE, has a weighted average lease term of 5.62. years, offering investors immediate cashflow and downside protection with no retail rollover until 2024.
The neighborhood has one of the highest per-capita incomes in San Francisco, making Pacific Heights extremely attractive to investors and retailers due to its strong demographics. According to CBRE, retail tenants are eager to break into the neighborhood, but with a vacancy rate of 1.7. percent, retailers often must wait patiently for vacancies to hit the market and rents to roll. Over the last five years, vacancy has remained below three percent, with some retail spaces in and around Fillmore St. going for between $100 to $165 per square feet.
“Tenants are beginning to take advantage of neighborhood retail rent discounts relative to Union Square,” explained Kovac. “Fillmore Street in Pacific Heights represents the best neighborhood retail in San Francisco.”
Popular retailers such as Rag & Bone, Frye Boots, Reformation, Saje and Paper Source all call the Fillmore Street corridor home.
The two residential units are located above the ground floor retail and have their own separate entrance at the rear of the property. The units are both modernized classic residential units, states the brochure, and are currently rent controlled, providing upside upon rollover. Apartment prices within the city continue to appreciate year-over-year, and as of November 2018, the rental rate for a one-bedroom apartment came in at $3,560 per month, states CBRE.
Additionally, the neighborhood has some of the highest home prices in the world and is close to the city’s “Billionaire Row” along Broadway between Broderick and Lyon. Listing prices have risen 16.6 percent year-over-year, with the average listing price reaching $3.1 million in 2018. The Pacific, a 76-unit condominium complex located right behind 2208 Fillmore, has earned more than $300 million in sales since it opened in 2016, with units selling as much as $4,000 per square foot.
Given these fundamentals, Kovac estimates the property could sell for about $13 million.
Since its founding in 2003, Prado has invested in over 60 properties throughout San Francisco, investing in sites with clear value-add opportunities. The firm acquires, manages and develops residential, retail and mixed-use product with a primary focus on infill and supply constrained markets with high barriers-to-entry.