What’s Going On in South Beach?!?!?

We’ve been covering the demise of King Street between 3rd and 4th for quite some time. While there’s lots of speculation as to what has caused so many storefronts to close up shop, we now have some solid answers.

Earlier this week, we received a second inquiry about Specialtys Cafe & Bakery located in China Basin at 185 Berry Street.

LiveSOMA,

You may have heard by now, but my partner got an email that the Specialtys in the China Basin Building has lost it’s lease and will be closing.  It seems as though the rash of closures in the area continues . . . .

Wow. What’s going on with South Beach? Don’t these people realize we just won the World Series, which means there’ll be thousands of extra people walking around down there come April? Apparently, the landlords are aware of this fact, and they’re trying to take advantage of the neighborhood.

Last month, we were sad to report that AIM Mail Center (221 King Street) had lost their lease. We’ve since received word from the owner of AIM, who seemed quite frustrated, not only with his landlord, but the entire City of San Francisco.

It has been crazy the last couple of weeks. We had to close our doors because of the same [reason] as Quizno’s. High rent, low revenue, and a landlord (Mission Housing) that had no sympathy or compassion to keep there retail space. They were non-negotiable, and untouchable when we asked for help in a rent reduction. It was pay up or get out! That is why you see us vacate so fast. 

If you have any influence, you better let the City know that they have blood sucking tyrants that manage their commercial property, and they better get someone else. Or, they will be in a world of hurt in the near future.

As for popping up some where else, this city has bled me dry of every cent that I own. So I am lucky if I will be able to keep a roof over my head. 

He didn’t have to tell me that there’s something very wrong happening with the property owners in this City. A couple of weeks ago, I received notice of a 10% increase in my own rent, which makes it a total of 16% increase since the day I moved in two years ago. “Market rate” they claim. Who is determining this market? If you ask me, this neighborhood feels more empty than it did two years ago.

Which brings me to Specialtys. The rumor is true, Specialtys is leaving their quaint location in China Basin. I just had a chance to talk to their Vice President of Development, Allen Arthur, and he basically told me that the problem with South Beach is greedy landlords.

Mr. Arthur claims that the owner of their Berry Street location (McCarthy Cook & Co.) attempted to TRIPLE their rent at the end of their current lease. “We paid about $7,000 a month on the old lease,” explained Arthur, “and we offered to increase to $9,200.” McCarthy Cook & Co. wanted to increase it to $22,000 a month!

According to Mr. Arthur, this Specialtys location generates $1.4 million of their approximate $2 million annual revenue from catering, and they just could not justify such a ridiculous increase. “They [McCarthy Cook] were looking to get above market rent, and we just couldn’t make it work.”

I don’t blame them. Who in their right mind would accept such ridiculous terms when there are at least 7 other empty store fronts in a two block radius? That’s not even considering the fact that most people aren’t even aware of that specific location, as it is hidden down a pedestrian alleyway that almost looks ‘off limits’ to the general public.

Apparently, the same company has failed to fill some office space above Specialtys for the same reason. They’ve met with Salesforce and other businesses, all of whom turned down what was likely an over-inflated offer for the space.

“They’re very hard to deal with,” explained Arthur. “It’s hurting the people who have rent and bought down there.”

There is some good news for Specialtys. Since most of their revenue at this location is generated through catering, they don’t need a location here, and can outsource the catering to other locations throughout the City. Arthur also mentioned that there have been ongoing negotiations in the Mission Bay area, near future locations of Salesforce and the UCSF Campus. That area could really benefit from a Specialtys Cafe & Bakery among other things, as it’s still severely underdeveloped.

So when will the property owners in this neighborhood get a clue? If nobody’s renting, why aren’t their prices going down? Is it a bad case of “price integrity” where they all collectively decided to raise rents, even though the businesses who can properly fit in said locations, generally can’t afford such steep rates? 

It’s a sad, sad day for he residents who were sold on this area under false pretense that there would be significant growth.