EVNA: “Formula Retail” needs more study

Castro from atop Twin Peaks

Castro from atop Twin Peaks

This past Wednesday, the Eureka Valley Neighborhood association hosted a discussion panel titled “Facts Regarding Formula Retail” where local merchants associations, neighborhood associations, commercial real estate interests, and a member of the SF Planning Department came together to engage the public on the future of formula retail in the neighborhood. The SF Planning Commission is currently undergoing a citywide study of the issue headed by AnMarie Rodgers with city supervisors pushing plans to expand a city-wide policy on formula retail.

Alan Beach-Nelson, EVNA President, was optimistic about the conclusions drawn during the discussion saying, “I think that our panel discussion was quite successful despite the fact that there is very little hard data and research on the topic. This is and will be an on-going conversation, and once the Planning Department completes their study, we should have another, co-sponsored, panel discussion on the results of the study, and the implications for our neighborhood specifically, and citywide.”

Beach-Nelson provided the Castro Biscuit with his notes of the meeting. Many of the discussions regarding the nuanced nature of defining formula retail and its true impact on local businesses, the neighborhood, and lease-rates concluded that more hard data and study is required. The hope is that the SF Planning Department’s city-wide study will provide some of these answers.

Some highlights:

  • Ground floor formula retail in the Castro/Upper Market corridor consists of 28% formula retail, 31 out of 110 businesses, and looking at the four major intersections, 34% is formula retail, 19 out 56 total establishments. (Source DTNA formula retail study.)
  • That 20% would be the cap for formula retail concentration along Upper Market was based mostly on an educated guess, and was set as a test.
  • As of June 2013 the vacancy rate in the Castro/Upper Market commercial zones is 6.9% (does not include upcoming businesses SFAF, CVS, Eureka!, etc.)
  • While the Castro/Upper Market vacancy rate would put us in the top 10 of all markets nationally, according to a Llenrock study of Colliers Commercial Real Estate data, our commercial corridor’s overall vacancy rate is nearly twice that of the City’s overall 3.8% rate. One panelist has noted after the discussion, that the high vacancy rate does not reflect lack of interest but is indicative of a complex entitlement process vis-à-vis formula retail, size and use restrictions, and, in some cases, very quirky property owners.
  • EVNA, Duboce Triangle Neighborhood Association, Merchants of Upper Market and Castro and the Castro Community Benefit District, funded in part through Supervisor Wiener’s office and the CBD are in the early stages of a “Leakage Study,” i.e., what types of services are not available in our neighborhood that cause people to go elsewhere to shop, which will help us to better understand this very issue.
  • Over 30,000 square feet of added retail space is coming online over the next two years along Market, an estimated 17 spaces averaging 1,700 square feet each. The urgency of needing a clear idea and plan of what we as a community want in our neighborhood so as to proactively address the added capacity is clear.
  • The Commercial Retail Brokers provided an after panel data point on the costs of space: “the new retail space available in mid-Market and upper-Market is, for the most part in the $42 to $45 per sq. ft. per year range, i.e. $3.50 to $3.75 per sq. ft. per month. In addition, the taxes, insurance and common area maintenance on these spaces generally range from $6 to $10 per sq. ft. per year or from 50 cents to 85 cents per sq. ft. per month”

Highlights taken from EVNA notes on “Facts Regarding Formula Retail” discussion (PDF).

The next step in this process of determining the future of retail in the ‘hood and how to address the forthcoming abundance of retail space will likely be waiting for the SF Planning Department’s findings followed by another community-wide discussion as suggested by EVNA President Beach-Nelson.

We’ll keep you in the loop!

Roy McKenzie

Roy has been a Castro resident since 2010 and is passionate about drag queens, bicycling, and food. Follow his babbling on Twitter.

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13 Responses

  1. rblack says:

    Great write up. Tons of info to digest, nice to see some hard facts.

    Amazingly high vacancy rate in the neighborhood – not good.

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    • Actually, 6.8% is considered in the top ten as the BEST vacancy rates, i.e. healthy and low but not too low. We would be # 10 nationally, though our commercial district’s IS almost twice SF overall, so a bit concerning, but STILL really good.

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      • rblack says:

        Nationally doesn’t matter when the rest of the city is at 3.8%.

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        • Well that is a point I noted in the write up that Roy included as a pdf. While it is still a top 10 rate for the whole country, it is still nearly twice the city’s overall rate so there should also be concern.

          Also, a point to note, the current vacancy rate is no higher than when I last did an analysis in 2007 when the economy was strong, and in 2009 when it was not strong. Almost identical over the past 6 years.

          At the end of the day, it’s a great rate nonetheless and one that a lot of city’s would LOVE to have, so we can be proud of being the in the top 10. I personally think we can feel proud, with a bit of caution that it needs to be paid attention to. But then, I personally tend to try to find the good in things, and this number is excellent. There isn’t data on neighborhood by neighborhood for SF, but I hope that is data that will come out of the citywide study.

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          • ls says:

            As you mentioned during the meeting, this rate is fairly good, but it might change a lot with all the new constructions and additional retail space coming to market.
            Hopefully, new businesses would be interested to move in this additional retail space.

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  2. Thank you Roy for the nice write up.

    It is a complex issue that will need more collection of data, a better understanding of the data, and more discussion on what we collectively want in our neighborhood. I look forward to working with anyone interested in the topic over the coming months to have a fair, balanced and open discussion of our collective priorities.

    To stay up-to-date on the topic, I encourage folks to join EVNA, http://www.evna.org/join, or subscribe to our subscriber list for free at the same page. While subscribers do not have a vote on our final position, it is a good way to keep informed. We’ll also keep Castro Biscuit in the loop for future discussion.

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  3. Mitch Mansfield says:

    30,000 sq ft of empty space on top of what we already have vacant. wow

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  4. Tom says:

    I’m glad that new space was included in the figures. Thank you Alan for being a part of the discussion here and keeping “the Biscuit” in the loop. I look forward to visiting some of the newer merchants when I make my annual pilgrimage in November.

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  5. John says:

    Nice to see EVNA taking the lead instead of letting DTNA from the other side of Market run the show. I hope they will continue to look at the situation through an rational and unbiased filter. Good report, based on facts not emotion. Money quote: “the high vacancy rate does not reflect lack of interest but is indicative of a complex entitlement process vis-à-vis formula retail, size and use restrictions, and, in some cases, very quirky property owners.”

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