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Though the retail outlook on the national scene is cautious at best for the coming year, brokerage firm Retail West has a different forecast for San Francisco, where it is based. Executives there see the city becoming more transit oriented, leading to more foot traffic on retail street corridors. Additionally, the firm predicts that more areas of the city will be open to retail development. One bump in the road in the coming year, though, could be Proposition G, a measure that calls for chains to go through an additional permitting process when they want to add new stores in the municipality. Matthew Holmes, a Retail West principal, spoke with GlobeSt.com about the city’s retail climate.

GlobeSt.com: Why will San Francisco retail do well despite the national downturn?

Holmes: When you have national retailers that are rolling out and making mass generalizations about slowing down growth due to the economy, our area is ill-affected by those kinds of decisions made. Why it’s less pertinent in San Francisco and the Bay Area is that it’s such an infill environment, you usually have to be 24 to 30 months ahead of your requirement. Today my efforts are being spent on delivery dates of 2011 and 2012. Unless you’re a total pessimist, all of the work we’re doing today is forward-thinking and, hopefully, post-recession.

GlobeSt.com: How will area changes in transit help retailers?

Holmes: The big way it helps is allowing for greater densification of current lots. It’s allowing for larger footprint stores to get in because they are part of larger projects that are being densified. I think in general it helps retail. From the standpoint of developers, it also reduces the parking requirement. The city is frowning upon parking as a necessary evil for retail. It’s a more cost-effective way because transit lines are getting denser and there are less parking requirements.

GlobeSt.com: Are retailers able to get over not having their traditional parking requirements?

Holmes: There’s a real education about it. What we’re having to do now more than ever is go back and look at other areas that are transit-heavy and draw a great parallel to markets like Boston, New York and Washington DC, that have much more effective transit than we do. We need to let the retailer know that this is not a suburban Sacramento market where people are not used to walking and taking transit. This is still a pretty transit-heavy city. There are 220,000 riders a day going down Market Street on all of the various lines. It’s one of the most transit-friendly streets in the US. When we came up with this data, a lot of retailers were amazed with all of the traffic going down that street.

GlobeSt.com: Are there any retailers not in the market that you expect to see soon?

Holmes: We’re very much on the radar of new chains coming in. I’d say we’re one of the top three or four markets in the US that chains will look to as an entry point, particularly the urban brands. New York and LA are the first stop, and I’d say we’re in the top three to five.

GlobeSt.com: What kind of impact will Proposition G have on the market?

Holmes: A very negative impact. You have to be so well ahead of your requirement because it puts a layer of administrative review onto a project, which is both time consuming and expensive for the applicant to go through. It takes about 24 months to get to a place where you even get your day in court in San Francisco. For the landlords that are scheduling the typical lease renewal with a six-month notice, we’re telling all of our ownership clients they should push it back to two years because you need a two-year head start now finding a tenant for the administrative process also.

It’s also going to really force retailers to be community-oriented when they come into San Francisco. The two largest industries in San Francisco are government, followed by non-profits. It’s larger than banking here. If you look at the two most powerful segments in San Francisco, both of those very much need to be addressed when doing business here as a retailer.

GlobeSt.com: Are mixed-use projects prevalent right now?

Holmes: Anything along transit is going mixed use. There is a pretty large initiative right now from the city, which is studying all surface parking lots and single-level retail sites, about potential reuse. We’re not far from the day when everything is going to be mandated mixed-use. In the City of Berkeley, you pretty much can’t build without mixed use.

GlobeSt.com: And there is a big push for sustainable development as well?

Holmes: San Francisco was offering an incentive to developers. If they could post a bond, they would get expedited treatment in the planning department if they processed LEED-certified projects. That got backloaded so quickly that they’ve decided to discontinue that program. But I understand there is legislation being discussed that would mandate LEED certification or some green point system on all new construction in San Francisco. Even satellite cities are pushing green initiatives. It’s becoming a reality in all of Northern California.

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