We recently took on a couple of listings in San Francisco’s Chinatown for one of our favorite clients. The spaces are located at 41 and 43 Ross Alley, in between Washington and Jackson Streets, and directly across from the Golden Gate Fortune Cookie Company – which I believe is the only one in Chinatown still hand rolling its fortune cookies. While preparing these properties for the market, I wandered around Chinatown’s commercial market in order to get a better idea of what makes this neighborhood resilient to the commercial real estate downturn.
San Francisco’s Chinatown is the oldest in North America, and is said to be the largest Chinese community outside Asia. There are two hospitals, numerous parks and squares, a post office and over 300 restaurants. I read that Chinatown is the most densely populated neighborhood in the city, and in addition, one of the most densely populated neighborhoods in the United States. Its estimated population in the 2000 census was at 100,574 residents, which accounts for two thirds of the overall ethnic Chinese population in San Francisco.
Maybe that density is one reason why Chinatown has a commercial vacancy rate of just 1.3%, the lowest in San Francisco. Another possibility could be the profusion of businesses, ranging from the herbal shops to antique dealers to grocers and restaurants. Whatever it is, Chinatown’s commercial real estate market is strong, stable, and desirable. According to CoStar, the average annual rent in Chinatown is $30.88 per square foot, or approximately $2.58 per square foot per month. In comparison, Union Square (one of San Francisco’s premier shopping districts) has only a slightly higher rental rate of $3.08 per square foot, but with a vacancy rate of 6.2%. And Chinatown has more supply, with over 5 million square feet of gross leasable area. Compare that to just over 3.2 million in Union Square.
After looking into the zoning, I also found that unlike its chain-free North Beach neighbor, Chinatown’s restrictions are loose – encouraging food, bar, and additional uses otherwise discouraged in North Beach. Its businesses not only serve the neighborhood, but offer items such as spices and fish, attracting both people from surrounding areas and tourists from around the world. According to SF Gate, Chinatown has more visitors than the Golden Gate Bridge.
Due to zoning, local neighborhood support, tourist traffic, and eclectic businesses, Chinatown may have just the right formula to succeed in these down times.