The Facts

The Board of Supervisors voted 9-2 to pass Supervisor Myrna Melgar's ordinance to make it easier to split large retail stores into smaller space, and to eliminate the hard cap on floor space for commercial spaces and in North Beach, West Portal, Pacific Avenue, and Polk Street commercial corridors. However, the Castro was removed from the legislation at the request of Board President Rafael Mandelman after the Castro Merchant's Association opposed the reforms, according to Adam Brinklow at The Frisc.

The reforms eliminate special permit requirements for businesses opening in spaces larger than 4,000 square feet and allow existing large retail spaces to be divided into smaller spaces without conditional use authorization—processes that currently add months and significant expense. Castro Merchants Association president Nate Bourg pointed to a 14,000-square-foot former Pottery Barn that has sat empty since 2018, saying "We don't need any more like that" while defending existing size restrictions.

The Context

San Francisco faces a citywide retail vacancy rate of 6.9 percent, with concentrated pockets reaching 53% on Van Ness and 22% in Union Square as the city struggles with its post-pandemic recovery. These reforms align with Mayor Lurie's broader PermitSF initiative to streamline business permitting.

The GrowSF Take

Merchant groups are not in the business of welcoming more competition, and we think their opposition to this vital reform is simply rent-seeking behavior. The existing regulations make it harder for new businesses to open in existing commercial areas, keeping potential competition at bay.

This hypocrisy is highlighted by the Castro merchants defending the regulations that have kept a 14,000 square foot retail space vacant for seven years, and opposing the reforms that would make it easier to split that same space into smaller stores.

The elimination of conditional use permits for space divisions is especially promising---removing these costly, time-consuming approvals will help entrepreneurs open businesses instead of fighting City Hall.

We're thankful for Supervisor Melgar for introducing these reforms, to Supervisors Sherrill, Sauter, and Dorsey for co-sponsoring, and to Supervisors Mandelman, Walton, Engardio, Fielder, and Mahmood for their support.