The Central Market neighborhood of San Francisco, roughly defined as the stretch of MarketStreet between 5th Street and Van Ness Avenue, is considered a vital segment ofthe urban core of the San Francisco Bay Area. Central Market is unique because it is centrally located in the City,has long served as a regional center for arts, entertainment, and retail, andis directly adjacent to the Civic Center.
But Central Market also has long suffered from high poverty and crime
rates, high vacancies, physical blight, lack of private investment, and other
social problems.
Eighteen months
ago, making the recovery of Central Market one of the central policy priorities
of his administration, Mayor Lee launched the Central Market Partnership. Many were dubious. It seemed yet another ambitious and
well-intentioned attempt to create change where change had stubbornly and
persistently refused to take hold over the years. Yet at a recent “lunchtime forum” on rental
housing hosted by San Francisco Planning and Urban Research, Meg Spriggs of
Avalon Bay called Mayor’s Lee’s efforts to revitalize San Francisco’s Central Market area the “role model for
neighborhood revitalization.” That’s high
praise from one of the earliest believers in the potential of Central Market,
and raises the question, is Central Market becoming a reality?
The Central
Market Partnership is a public/private initiative to renew and coordinate
efforts to revitalize the Central Market neighborhood.
The City’s goal is to
restore Central Market as San Francisco’s downtown arts district while
incentivizing new residential development, retail, restaurants, services and
employers to take advantage of the transit and downtown location, and serve the
adjacent Tenderloin and SOMA neighborhoods. The Mayor’s Office of Economic and Workforce Development
is leading this multi-agency effort.
One of the
central components of the Central Market strategy has been the Central
Market/Tenderloin Payroll Tax Exclusion.
Dubbed the “Twitter Tax” by skeptics, the Tax Exclusion originally was
perceived as a financial giveaway to keep Twitter in San Francisco. Yet, over a year after Twitter made its
decision to move to the Furniture Mart building at Market and Tenth Streets,
numerous other milestones in Central Market suggest that revitalization efforts
may be taking hold:
· Two weeks ago,
Dolby Laboratories, which has been headquartered in San Francisco since the
1970s, announced its purchase of 1275 Market St. for $109.8 million and plans
to renovate and occupy the entire 385,000 square foot building;
· The Kor Group,
which purchased the Renoir Hotel earlier this year, recently opened “A
Temporary Offering” on the ground floor of the hotel, a collection of pop-up
concepts that occupies virtually the entire block (tenants include FoodLab, the
Rio Grande bar, and Trailhead, which is itself a retail collaboration);
· Trinity has
begun construction of the second residential tower in its Trinity Plaza
project, which will add over 400 dwelling units at Mission and Eighth
Streets. The entire Trinity Plaza
project will occupy the blocks bounded by Market, Mission, and Eighth Streets,
and the Stevenson Street terminus. Trinity Plaza includes 60,000 square feet of
ground-floor retail space, with renovated street frontages along Market,
Mission, and portions of Eighth Street;
· CityPlace, a
stalled retail project on Market between Fifth and Sixth Streets, was recently
purchased by Cypress Equities, a Dallas-based firm that plans to move forward
with a sleek, glass-fronted, five-story mall; and
· Other technology
companies following Twitter to Central Market include Yammer, One King’s Lane,
ZenDesk, Zoosk, and CallSocket.
Not only is
technology coming to Central Market, but their financiers are coming as
well. Sand Hill Road venture capital
firm Benchmark Capital recently signed a lease to take two floors at 998
Market, the famously crime-ridden corner of Sixth and Market. And venture capital firms have shown interest
in the 70,000 square-foot building at 1161 Mission Street. Michael McCarthy, who leases the building for
the owner of 1161 Mission, recently told the Business Times, “If I had told you
six months ago that the 1100 block of Mission Street would be seeing love from
VCs, you would have had me committed. I
thought it would take Twitter moving in and more gentrification of the
neighborhood before people would start to follow. I missed it by about six months. All of a sudden, it’s real.”
Another issue is
that Central Market needs residential development to complement its growing
commercial segment. But, as expressed at
the SPUR lunchtime forum on rental housing, the traditional roadblocks to
residential development in San Francisco are ever-present in Central
Market. Eric Tau of AGI Capital pointed
out that in Oakland, a 200-unit apartment project generally would qualify for
the in-fill exemption under CEQA, but that would never happen in San Francisco
because of the threat of lawsuits. This
means that the more protracted environmental review of an EIR or a Mitigated
Negative Declaration is required. The
additional time and costs that accompany such review makes apartments more
expensive and more difficult to build.
And Mr. Tau, Ms.
Spriggs, and the third panelist, Amir Massih of Archstone Trust, all agreed
that City policies requiring the development of larger apartments in order to
keep families from leaving the City do not achieve their intended goals and hinder
development because the larger units do not get rented.
Notwithstanding
these challenges, the potential for a revitalized and thriving Central Market
seems more and more likely, and is an intriguing opportunity for the
development community. We will continue
to monitor the progress of Central Market and report with updates.
The issues discussed in this update are not intended to be legal
advice and no attorney-client relationship is established with the
recipient. Readers should consult with legal counsel before relying on
any of the information contained herein. Reuben & Junius, LLP is a
full service real estate law firm. We specialize in land use, development
and entitlement law. We also provide a wide range of transactional
services, including leasing, acquisitions and sales, formation of limited
liability companies and other entities, lending/workout assistance, subdivision
and condominium work.
Copyright 2012 Reuben & Junius, LLP. All
rights reserved.
