This April the Planning Commission unanimously approved a new policy that will create new hurdles for formula retail (a.k.a. “chain stores”) trying to locate in the Upper Market Street neighborhood. The policy prohibits the Planning Department from recommending approval of new uses that would bring the concentration of formula retail within 300 feet of the proposed location to a threshold of 20% or greater. The policy was a collaborative effort of the Department and members of the Duboce Triangle Neighborhood Association (“DTNA”).
For years, the City has been requiring Conditional Use authorization to locate formula retail in neighborhood commercial districts, citing an interest in protecting San Francisco’s vibrant small business sector. The Hayes Valley Neighborhood Commercial District (“NCD”) and North Beach NCD have even chosen to ban the location of formula retail uses entirely. Formula retail is defined by the Planning Code as “a type of retail sales activity or retail sales establishment which, along with eleven or more other retail sales establishments located in the United States, maintains two or more of the following features: a standardized array of merchandise, a standardized facade, a standardized decor and color scheme, a uniform apparel, standardized signage, a trademark or a service mark.”
Under the new policy, applicants seeking to locate any formula retail store in the Upper Market neighborhood will be required to provide the Department with an analysis of the concentration of formula retail within 300 feet of the proposed site. If locating proposed formula retail use within the Upper Market neighborhood would bring the concentration of formula retail within a 300 foot radius to greater than 20%, the Department will not be allowed to recommend approval of the application to the Commission, regardless of the level of public support. A detailed description of the formula for assessing the concentration of formula retail under this policy is provided in the Department’s Executive Summary of the policy: http://www.sfplanning.org/index.aspx?page=3438.
However, if the Department determines the surrounding concentration to be lower than the 20% threshold, it would evaluate the proposed Formula Retail application and make its recommendation to the Commission based on other criteria set forth in the Planning Code. These criteria include: (1) the existing concentrations of formula retail uses within the district; (2) the availability of other similar retail uses within the district; (3) the compatibility of the proposed formula retail use within the existing and aesthetic character of the district; (4) the existing retail vacancy rates within the district; and (5) the existing mix of Citywide-serving retail uses and neighborhood-serving retail uses within the district.
Of course, even if the Department recommends disapproval under the new policy, the Commission retains its discretion to approve or disapprove the formula retail application. And, the Department will still evaluate each proposed Formula Retail application based on all applicable criteria under the Planning Code, in order to aid in the Commission’s deliberation.
How important is the Department’s recommendation in these kinds of cases? The Commissioners’ comments at the April 11, 2013 Commission meeting may shed some light on the issue. Commissioner Antonini noted that it places a restriction on the total concentration of formula retail in the area, without differentiation due to the type of formula retail proposed – banks, restaurants, pharmacies, groceries, cell-phone retailers and clothing stores are all treated as one general formula retail category. He also voiced concerns that a number of long-term retail vacancies exist along Upper Market Street, and that new and existing commercial spaces containing larger square footages could be difficult to fill with non-formula retail uses. Prior to casting his vote in support of the policy, Commissioner Antonini reiterated that the policy will not eliminate the Commission’s discretion to weigh these factors before making is ultimate decision on a proposed formula retail use, stating, “It’s just the staff recommendation, which might not carry the day.”
However, most of the Commissioners’ comments were supportive of the policy and of increased restrictions on formula retail uses. Commissioner Hillis questioned whether the 20% threshold was low enough to effectively restrict new formula retail in the area, stating that “I would like to make sure that the percentage is low enough that…we are setting the signal to formula retail that you don’t want more formula retail on this corridor, which is what we are trying to do.” Likewise, Commissioner Borden explained that although the Commission has gone against Department recommendations in the past, they often lead the Commission to more robust discussion of the proposed uses and lead the Commission to “think harder about why we believe a particular business should be in a particular location.” The new policy on formula retail in the Upper Market Street neighborhood was unanimously approved by the Commission in April. More information on formula retail uses in San Francisco can be found on the Planning Department’s web site at: http://www.sf-planning.org/index.aspx?page=2839.
Real Estate Round Table – May 9 – Let’s Talk Gross Receipts Tax
Last year’s passage of the gross receipts tax in the City brought us an entirely new tax regime for business. Next week the RERT will feature Manny Fishman of Buchalter Nemer to explain this new world of the gross receipts tax. If you would like to attend or learn more about the RERT, please contact Lenore ElKarou at firstname.lastname@example.org or (415) 567-9000 x452.
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 & Rose, 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.