San Francisco City Office Seeks Lease Termination Due to Excessive Rent

San Francisco is looking to move out of its own city.

According to a report by The San Francisco Standard, the City of San Francisco has decided against renewing its building lease at 1155 Market St. due to high rent and a declining real estate market.

Since 1999, the city has leased offices in the 11-story building from the nonprofit LightHouse for the Blind and Visually Impaired. However, the City’s Board of Supervisors has rejected a new five-year lease renewal due to the high rent and decreasing property values in the city.

These offices have been used by various city departments including 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 relies on the city’s lease to pay off its $48 million mortgage and is at risk of defaulting in January 2025, as per real estate data company Trepp.

“Losing the City as a tenant would cause financial strain for the Lighthouse for the Blind,” said LightHouse CEO Sharon Giovinazzo.

The mayor’s office is supporting the decision not to renew the lease in order to capitalize on the current market conditions and consolidate offices, according to spokesman Jeff Cretan.

A new lease agreement has been proposed at a lower cost, but LightHouse has countered with two years of rent-free in their offer. Giovinazzo warns that the city may abandon the building, which is located near City Hall.

Previously, the city was planning to renew the office space at 1155 Market St. until 2028 at a yearly cost of $6.68 million, with a 3% annual increase in rent. The total rent over five years would amount to $35.5 million.

Lighthouse purchased the building for $70.2 million in 2015, and the rent is significantly higher than the local appraised rental costs.

“I think it’s important for the City and County of San Francisco to show that we can make decisions in favor of the market,” said Supervisor Aaron Peskin. “We should reject the current offer and be prepared to invest in a new location.”

The building may struggle to find new tenants due to concerns about crime and drug use in the surrounding streets.