In San Francisco’s hot real estate market, rent for the Police Department’s tactical unit in Potrero Hill is skyrocketing by more than $1 million a year.
To rent the 52,000 square feet of office and warehouse space at 1700 17th St. for another 10 years will cost at least $37 million, according to analysis by the budget analyst.
But city officials say they have no other option.
The City signed the 10-year lease back in 2008, when rent was just $33 per square foot, or $1,720,125 per year. The final year of that lease cost The City $2.07 million or $39.75 per square foot.
Now a proposed a 10-year lease extension will set the annual base rent at $3.07 million or $59 per square foot — which is the appraised market rate.
The Board of Supervisors Budget and Finance Committee unanimously voted to approve the deal Thursday, but Supervisor Sandra Fewer raised concerns about the cost of the lease and expressed frustration over “feeling forced” to approve it, noting that “this rent is very high.”
Fewer questioned why the Police Department’s Tactical Company couldn’t have found a home in the new public safety building on Third Street. The $243 million voter-approved new Police Department headquarters, which includes space for the Southern District Police Station and Fire Station No. 4, opened in 2015. Police headquarters and Southern station were previously located at the Hall of Justice at 850 Bryant St., which is slated for eventual closure and demolition.
Board president Malia Cohen said that “there is no space in the new headquarters.”
“This is a fairly large office space, warehouse space,” Cohen said, adding that the deal “makes sense.”
Fewer said The City needs to figure out how to avoid such leases.
“It seems as though we are always kind of stuck and we are at the mercy of these high rents,” Fewer said. “It’s just not really good use and proper use and efficient use and effective use of public funds.”
A 2017 budget analyst audit of the Real Estate Division agreed, saying The City should address the leasing of space for ongoing city functions.
“The City does not have a sufficient process to reduce the high costs to the City of leasing private property in San Francisco’s real estate market,” the budget analyst’s report said. It called for “setting criteria and priorities on planning alternatives to housing essential City functions in leased space.”
Andrico Penick, the new executive director of the Real Estate Division, acknowledged the shortcoming.
“We do not have a long-term plan for transitioning our departments from lease space to city-owned space, which is our desire and our goal.” Penick said. “We have leases that come due that are expiring and they don’t always sync up with buying opportunities or the funding in order to make those purchases.”
He said he would like “The City to develop and own swing space, so that when these leases expire we have a place to park the departments until a buying opportunity comes along and we are not forced in this: you got six months to decide whether you want to buy something or lease something.”
Fewer said that “it seems like we should be landbanking some land.”
According to the audit, The City owns about 1,100 buildings and 2,000 parcels in San Francisco totaling approximately 6,000 acres and the Real Estate Division maintains about 100 leases of public property to private entities and about 100 leases of private property for public purposes.