Transbay housing developer wants out of grocery store commitment

A housing developer will attempt for the second time Tuesday to get out of a promise to bring a grocery store to the Transbay area as part of a more than 500-unit project.

In 2015, developer Related California agreed to try and lease ground floor commercial space of an approved housing development at 450 Folsom St., or Transbay Block 8, to a grocery store.

But with the development near completion, the developer says they cannot find a grocery store to lease the space and wants out of the obligation.

In December, the Commission on Community Investment and Infrastructure denied the initial request and told the developer to double down on its efforts over the next 90 days and see what it could come up with.

Supporters of the grocery store said it was essential to creating a community as more residents move into the area with the new housing. The project is a 55-story mixed-income residential project comprising 548-units.

Now, more than 90 days later, Related California has said it still cannot find a grocery store. That position is supported, as it was in December, by the staff of the Office of Community Investment and Infrastructure, including executive director Nadia Sesay. Under the development agreement, the commission can release the developer of the grocery store obligation if it finds they made a “good faith” effort.

The reason, they say, is no grocery store is interested in leasing the two-level, ground floor and basement, 12,500 square-foot space.

Related California has used the time since December to contact grocers that previously declined and to contact 16 new grocers who were suggested by the commission, including Rainbow, Good Life, Walgreens, Target and Krogers.

“Developer offered annual rent and a tenant-improvement allowance as incentives to leasing space in the Project,” said Sesay’s memo to the commission in advance of Tuesday’s vote. “All of the grocers contacted continue to be disinterested in leasing the space due a combination of one or more of the following factors: (a) the split-level configuration, (b) small footprint, (c) proximity to an existing grocery (Woodlands Market), and (d) high operating costs in San Francisco.”

The failure in the intervening months will likely come as a disappointment to many living in the area.

The community benefit district comprising the Transbay area, known as the East Cut Community Benefit District, surveyed nearly 540 persons through homeowner associations and Nextdoor, an online social network, in February and found “there is a strong desire for a reasonably priced grocery store in the East Cut District.”

“Four out of five resident respondents (81%) would do significantly more or all of their shopping locally if another affordable grocery store moved into the neighborhood,” the survey said. “The only grocery store option in the East Cut District is Woodlands, an upscale, specialty market.”

Jonathan Shum, vice president of Related California, detailed the new efforts made since December in a March 22 letter to Sesay.

Among the efforts was to try and get Walgreen’s or Target to lease the space, but they were not interested “due to the proximity of other store locations,” Shum wrote.

“They further expressed the difficulties of operating in a split-level location and in a space smaller than 20,000 sf. Raley’s passed on the site due to the split-level configuration,” he continued in the letter.

He also wrote that they wanted to start looking for other types of commercial businesses to avoid a vacancy.

“We believe it is critical to shift our marketing efforts to a broader retail offering to avoid detrimental vacant ground floor retail which has been an area of concern across the City,” Shum wrote.

The Commission on Community Investment and Infrastructure meets 1 pm Tuesday at City Hall in Room 416.

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