San Fran City Office Wants Out of Lease Due to High Rent

(Dreamstime)

San Francisco wants out of … San Francisco.

The City of San Francisco is rejecting the renewal of its building lease at 1155 Market St. due to high rent amid the declining real estate market, The San Francisco Standard reported Monday.

The City of San Francisco offices in the 11-story building, leased since 1999 from nonprofit LightHouse for the Blind and Visually Impaired, but the City’s Board of Supervisors rejected approving a new five-year lease renewal due to the high rent amid declining property values in the city, according to the report.

The leased offices have served the San Francisco Public Utilities Commission, Office of the Treasurer & Tax Collector, the Mayor’s Office of Disability, and the Department of the Environment.

The building itself say it needs the city’s lease to pay its own $48 million mortgage as it warns of a potential default come January 2025, according to real estate data company Trepp.

“Losing the City as a tenant would create a great financial hardship for the Lighthouse for the Blind,” LightHouse CEO Sharon Giovinazzo told the Standard in an email.

The mayor’s office is supporting the rejection of the lease to take advantage of the market downturn and consolidate offices, according to spokesman Jeff Cretan.

“We are being responsible with taxpayer funds and looking for the best opportunities to continue to have a strong presence our Downtown and Market Street area,” Cretan told the Standard. “This isn’t about quitting downtown — it’s about finding a new building.”

The city has proposed new lease agreement 1155 Market St. at lower cost and a counter offer has been sent from LightHouse that includes two years rent free, according to Giovinazzo, who warns the city likely to “abandon the building that literally sits in the shadows of City Hall.”

The city was going to renew the roughly 103,000 square feet offices at 1155 Market St. until Jan. 31, 2028 at $6.68 million per year with a 3% increase each year for a total of $35.5 million in rent over five years.

Lighthouse bought the building in 2015 for $70.2 million, and the rent is far higher than local appraised rental costs, according to the report.

“I think it’s important for the City and County of San Francisco as a very active market participant to send a message that we can talk with our feet,” Supervisor Aaron Peskin said in a committee meeting last year. “I think we should just buckle up, reject it, and be ready to put up the dollars to move somewhere else.”

The building is likely to struggle to rent the building to others due to concerns of crime and drug use on the surrounding city streets, according to the report.