A Plan To Keep Businesses Here
TMC client, TEF Architecture, was recently featured in an article about the increasing leasing costs in San Francisco. TEF Architecture was quoted with TMC about why it is better to own than lease, and how TMC can help. The story was published by BisNow San Francisco. Read the full story below:
A Plan to To Keep Businesses Here
The rental market is outrageous, says TEF Architecture founder Douglas Tom (S.F. rates have spiked 75% in three years). Knowing he had to stay in the city to be near clients (projects include Avalon Mission Bay III and Glen Park Branch Library), he picked an up-and-coming option: the ownership route. TMC Financing worked with Presidio Bank to finance the $4.2M relocation for TEF’s new office in Pacific Heights. Financing was provided with a 20-year, fixed-rate, SBA 504 loan. TEF’s new space is double the size (12k SF) at 1420 Sutter (below), and he’s using the money to stabilize monthly expenses, make building improvements, and hire more employees. They were previously in 201 Post.
Any real estate market is cyclical, but we seem to be living in an extreme example of that, says TMC SVP of biz development David Griffis. Real estate in S.F. is booming, and the idea of ownership is the only way a biz owner can really insulate itself—especially those that have to be in the city, he says. (Plus you can have full-scale nerf wars without worrying about getting your deposit back.) The biggest two expenses for a small biz are labor and occupancy, so ownership controls costs associated with the latter.
He’s seen businesses that have to close doors or vacate city when their lease comes up during a market upswing and their landlord triples their rent. He says it’s getting harder for small biz to find an entry point in the city. David gets a lot of referrals from CRE brokers (for the TEF deal it was from DTZ). In the SBA 504 program, borrowers make a down payment as low as 10%, versus up to a conventional 30% down payment.