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Report regarding a direct lease between the City of South San Francisco and the property owner at 235 Grand Avenue to use the second floor office space for City staff for two years. (Mike Futrell, City Manager and Mike Lappen, Economic Development Coordinator)
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RECOMMENDATION
Recommendation
Staff recommends the City Council authorize the City Manager to enter into a direct lease with the property owner at 235 Grand Avenue to use the second floor office for City staff temporarily for two year, beginning August 1, 2021.
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BACKGROUND/DISCUSSION
Over the past 15 months the City has embarked on new programs and initiatives to address the numerous economic and social equity issues arising from the COVID-19 pandemic and the racial and social equity awareness following the murder of George Floyd. This has included the addition of Graduate Fellows to assist in these initiatives, working under the direction of the City Manager and the team in the City Manager’s Office. These initiatives and associated staff have stretched the space available in City Hall to the limit, and temporary office space in the downtown area is needed to accommodate city staff.
Over the past few months, City staff has explored potential downtown locations and evaluated them based on location, size, configuration, accessibility, availability, and affordability. Based on these criteria, staff quickly deemed 235 Grand Avenue as the preferred leasing option. The unit has a central and accessible location, large space, private offices, open floor plan, bathroom, kitchen, conference room, access to transit, and immediate availability.
The proposed lease rate is “full service” and equates to $2.46 per square feet per month - a rate that includes all monthly expenses save for utilities (as mentioned above). This falls within the range of current lease rates for space in the downtown, as verified by CoStar. As a comparison, staff investigated three possible sites in downtown that offered office space. Two of the sites were too large, approximately 4,000 square feet each, and the building owner for the unit with a suitable space that fit within our size and location category wanted to city to pay $3.00 per feet per month, which includes the base rent and the additional “triple-net” utility and maintenance costs.
The Space - 235 Grand Ave
The roughly 1,300 square foot office space is located on the second floor above the ICBC Bank. The property is attractive for City staff and the new Graduate Fellows office space due to the large usable office space inside, office amenities, high pedestrian traffic along Grand Avenue, walking distance to Old Town and other areas of the downtown community, and its proximity to transit (SAMTRANS and Caltrain). The space would also provide sufficient space to allow City staff and the Graduate Fellows to work effectively in a professional environment. The proposed lease terms include:
• Office Square feet, approximately 1,300 sq ft
• Rent is to be $3,200 per month, gross lease
• Tenant to pay for the prorated share of PG&E and water
• Two years effective August 1, 2021
• Big Conference room is not included in the lease but the City staff can book it in advance to use it subject to owner’s discretion.
The unit is currently used as an office space for Hisense staff and is in good shape. The City would not need to pay for any significant tenant improvements other than providing office furniture, computers, and other equipment and furnishings.
FISCAL IMPACT
The annual rent for the office unit would be $38,400.00. The City would be responsible for sharing PG&E and water use costs with the property owner, which is estimated to be approximately $100.00 per month. The City could purchase furniture from Hisense, estimated to be $1,500. Staff will consult with the City’s I.T. Department to determine an estimate for computers, phone service and internet service. The costs will be covered by the City Manager’s office.
CONCLUSION
City staff is recommending that the City Council authorize the City Manager to enter into a direct lease with the property owner at 235 Grand Avenue to use the second-floor office for City staff and the Graduate Fellows program.