Two-Person City Leasing Team Logs 78 Deals as Lease Risks Mount

San Francisco's retail vacancy rate has fallen to its lowest level since 2023, but the Office of Small Business warned the Small Business Commission on Sept. 28, 2026, that the leases small tenants sign are getting riskier. The commission unanimously added eight neighborhood institutions to the Legacy Business Registry. Commissioners also got an early look at bills that would give workers a path to buy the businesses that employ them.

• 78 lease signings, up 47%, for a two-person city leasing team as citywide retail vacancy hits 5.8%

• Staff flag one-way renewal options and near-universal personal guarantees in small business leases

• Eight businesses join Legacy Registry, 6-0, including a pharmacy founded in 1906

• Planners pitch a citywide cultural heritage survey covering about 120,000 parcels but struggle to reach merchants

• Worker buyout rights, home-kitchen restaurants and tenant organizing bills are headed to the commission

1 Big Thing: Vacancies Fall, but Leases Bite

Why it matters: Citywide retail vacancy fell to 5.8%, according to CoStar data presented by staff. Yet the terms small tenants sign can decide whether a family business survives. The city's leasing help runs on two employees.

Where things stand: Iris Lee, Commercial Leasing Specialist, Office of Small Business, said the leasing team recorded 78 lease signings last fiscal year, a 47% increase over the prior year. The team also reviewed about 190 leases and letters of intent worth about $20M in lease value, or 13.4% of citywide leasing. So far this fiscal year, 17 deals are signed and 11 are pending.

Lee cautioned that CoStar is not all-encompassing. Office data sources differ by about 290 basis points, and smaller tenant deals largely go unreported.

The market varies sharply by neighborhood:

• Union Square vacancy stands at about 20.3%.

• AI firms took 47% of office leasing in the first half of 2026. Their demand is concentrated in Class A "trophy" buildings, which carry a 37% rent premium.

• Class B and Class C office vacancies are at record highs. Yerba Buena is at about 56%.

• The single largest lease was signed by the city itself, at 1455 Market St.

Vice President William Ortiz-Cartagena said Mission vacancy runs around 9%. "Usually we were historically lower than most commercial corridors," he added.

The fine print: Lee listed several clauses that trouble tenants:

• Landlords taking a share of sublease or assignment proceeds

• Tenants taking on structural maintenance

• Personal guarantees

• One-way renewal options

"Most recently, you've seen a one-way option to renew, meaning that if the tenant does not agree to the price that is set by the property owner, that their lease is effectively terminated," said Lee.

A commissioner asked how often landlords require personal guarantees. "Like 99.99%," Lee answered. Ortiz-Cartagena described the stakes: "That could just ruin you generationally if you sign the wrong lease."

Legal help is thin. Lee said assistance through LCCR is still limited. Commissioner Dimitri Thierry Cornet asked how to recruit pro bono law firms, and Lee pointed to the SF Bar's lawyer referral network.

Decisions and stakeholder impacts: This was an informational item with no vote. Commissioner Ron Benitez asked whether the team has leasing targets. "We don't have a target. I mean, of course, we'd love to continue to increase that, but there's only two of us," Lee said.

The Office of Small Business director called the program unique. "I think we are probably the only jurisdiction I can think of in the country that offers this in-depth commercial leasing service for small businesses," the Director said. The director also said they hope to expand the team.

Staff cited partner programs that could help tenants:

• The Port's Blue Economy Initiative, with up to 50% off leases

• The Mayor's Office of Community Development's funding notice for nonprofit ground-floor spaces

• Incentives from SF Film and SF Environment

In response to Commission President Cynthia Huie, Lee said rising rents and tenant improvement costs are concentrated downtown.

What's next: "I feel like we need this presentation regularly," said Huie. She asked staff to schedule recurring leasing updates on future agendas.

Eight Neighborhood Anchors Win Legacy Status

The basics: The Legacy Business Registry, run by the Office of Small Business, recognizes longstanding, community-serving businesses.

Where things stand: Michelle Reynolds, Programs and Communications Manager, Office of Small Business, presented eight applications. "All applications received a positive recommendation from the Historic Preservation Commission," she said.

The eight businesses are:

• Ace Wasabi, Marina, founded in 1995

• Bull's Head Restaurant, West Portal, founded in 1979 by Korean immigrants Tom and In Soon Shim

• Celia's by the Beach, Sunset, founded in 1960 and the neighborhood's oldest standing Mexican restaurant

• Copy Edge, Ingleside, founded in 1989; its founder helped start the Ocean Avenue Association

• Fresca, Noe Valley, a family-owned Peruvian restaurant founded in 1996

• Joe's Pharmacy, Richmond

• Katsura Garden, a bonsai shop and founding tenant of the Japantown Mall since 1974

• Wayo Sushi, Van Ness Avenue

"The pharmacy was first established in 1906, and it is the oldest pharmacy in San Francisco," Reynolds said of Joe's Pharmacy.

Voices from the counter: Three business representatives spoke in support, and no one spoke in opposition.

• "Katsura Garden is one of the few remaining authentic bonsai shops in San Francisco," said Ritsuko Suzuki, owner, Katsura Garden. She credited the Japantown Community Benefits District for its help.

• Victoria Ayano Ogawa, daughter of Wayo Sushi's chef-owner Mamoru Ogawa, described her father's nearly 40 years running the restaurant alone, seven days a week. She said the restaurant feeds neighbors and health care workers from the CPMC Van Ness campus.

• Grace, speaking for Bull's Head Restaurant, said "obtaining this legacy status for me was important to honor their legacy," referring to her parents.

Decisions and stakeholder impacts: Commissioners shared personal ties to the businesses. "The family tradition of going to Ace Wasabi bingo night is hard to beat," said Commissioner Fischer.

Huie framed the designations in broader terms. "Many of them, I think, are holding up cultural heritage for many communities," she said.

Registry status benefits family- and immigrant-owned businesses in eight neighborhoods.

Vote: The motion by Fischer, seconded by Benitez, passed. For: 6 (Benitez, Cornet, Fischer, Huie, Ortiz-Cartagena, Zouzounis); Against: 0; Absent: 0.

Planners Want Merchants in the Heritage Story

Why it matters: Historic-resource findings shape what changes a business can make to its storefront. They can also unlock more flexible building rules.

Where things stand: Elena Juvonen, Assistant Preservation Planner and Legacy Business Coordinator, and Maggie Smith, Acting Principal Planner, both of the Planning Department, briefed the commission on SF Cultural Heritage.

"While traditionally preservation has been narrowly focused on buildings and architecture, we're expanding that lens to recognize that history also lives in cultural heritage and lived experiences," Juvonen said.

The program has three parts:

• SF Histories: historic context statements, including African American, Pan-Latino, Chinese American and American Indian contexts

• SF Survey: a proactive effort to standardize evaluations for about 120,000 parcels, supporting environmental review under the California Environmental Quality Act, permits and area plans

• SF Places: formal recognition, such as landmarking

For merchants, the upside is flexibility. "A big benefit of being identified as a historic resource is getting to use the California Historical Building Code, and that provides a lot of flexibility," Smith said. She cited accessibility requirements and door widths as examples.

Juvonen added that planners sometimes conclude during the survey that the Legacy Business Registry is a better form of recognition than historic resource status.

The other side: Outreach is lagging. Staff said they had heard back from about one of roughly eight merchant groups they visited. "I think just getting the word out is our biggest hurdle," Smith said. Fischer suggested hosting one-on-one coffee gatherings with business owners.

Commissioner Miriam Zouzounis urged staff to serve communities without cultural districts. "There's been Arab merchants in San Francisco since the Gold Rush. But we don't have a cultural district," she said.

William Ortiz-Cartagena criticized the program's website, saying "it's a little DMV-ish." Smith acknowledged that some communities may not want their information shared on a city-hosted platform.

What's next: No action was taken. Staff announced an OMI History Day at the Ingleside Library branch on Oct. 17, from 3 to 5 p.m.

Worker Buyouts, Home Restaurants on Deck

Where things stand: The Office of Small Business director previewed four ordinances recently introduced at the Board of Supervisors:

• A ban on retail sales of nitrous oxide, with exceptions for medical and dental practices

• Opting San Francisco into the state microenterprise home kitchen operation (MEHKO) program

• A process for forming commercial tenant associations

• A right of first offer and right of first refusal that would let employees buy a business being sold

"This would essentially allow a new permit type to allow home kitchens to operate as small restaurants or commissaries," the Director said of the MEHKO program. The director noted caps on the number of services and on annual revenue. Operators may charge customers. Questions about alcohol were deferred until the bill is heard.

Under the tenant association bill, "our Office of Small Business would be tasked with tracking and enforcement of commercial tenant organizations," the Director said.

The worker-purchase ordinance would amend the Labor and Employment Code. Employees would buy the business through a worker cooperative.

Decisions and stakeholder impacts: The tenant association and worker-purchase bills would expand the office's role. The worker-purchase bill would also change how small businesses change hands.

What's next: Ordinances sit on a 30-day hold before a committee can hear them. The tenant organizing and worker-purchase items were originally meant for this meeting. They now await confirmation from the sponsor's office. There was no public comment on the report.

Minor Items

• Minutes: The commission approved its Aug. 24, 2026, minutes. For: 6; Against: 0.

• Commercial condos: Ortiz-Cartagena said he is close to a model that would let small businesses own ground-floor condominiums in mixed-use buildings. Huie flagged homeowners association obligations as a barrier, and Ortiz-Cartagena noted that lenders are hard to find.

• No more cold shells: Ortiz-Cartagena is working with the Planning Department to push nonprofit housing developers to build out ground-floor retail during construction.

• Office hours: The Office of Small Business holds community office hours Oct. 8 at Vive La Tarte in Noe Valley and Poesia Cafe in the Castro. Zouzounis will co-plan a Tenderloin session with translation.

• Block party: Huie announced an Oct. 9 Chinatown night market and a mahjong block party on Waverly Place.

Looking ahead: Watch for the worker buyout and commercial tenant organizing bills to reach the commission once the sponsor's office confirms a date. Recurring leasing updates are also expected on future agendas.