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Report regarding a resolution approving a sublease agreement with Joanne Wan, DBA Milk Tea Lab, LLC, for the commercial space at 636 El Camino Real, Suite C. (Katie Donner, Management Analyst II)
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RECOMMENDATION
Recommendation
Staff recommends that the City Council adopt a resolution approving a 10-year sublease agreement with Joanne Wan, DBA Milk Tea Lab, LLC (Milk Tea Lab), for the commercial space at 636 El Camino Real, Suite C, with one option for an additional 10-year extension.
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BACKGROUND
Milk Tea Lab opened in 2019 in South San Francisco at 636 El Camino Real, Suite C. Known for its customizable drinks, fun laboratory-inspired tonics, and cozy hangout atmosphere, Milk Tea Lab offers a variety of classic milk teas, fruit refreshers, and smoothies. The shop operates daily from 12:00 p.m. to 11:00 p.m. and is part of a Bay Area franchise with nine locations. Since opening in South San Francisco, Milk Tea Lab has established itself as a popular destination along the El Camino Real corridor, contributing to the City's diverse retail and dining offerings.
Existing Lease
Milk Tea Lab’s sublease with the City is expiring on September 30, 2026, with the tenant paying $3,939.29 (or $2.46 per square foot). Milk Tea Lab currently occupies 1,600 square feet for its retail operation.
Lease Proposal
Joanne Wan, the owner of Milk Tea Lab, sent the City a lease proposal in Summer 2026 for the 1,600-square-foot retail space she currently occupies. Ms. Wan initially proposed a 10-year sublease at $3,200 per month, or $2.00 per square foot, for the first 12 months, and an extension option. The initial proposal represented a 19% reduction from the tenant’s current monthly rent of $3,939.29.
Following discussions with staff, the proposed starting rent was increased to $3,440 per month, or $2.15 per square foot. The proposed rate represents a reduction of $499.29 per month, or 12.7%, from the tenant’s current rent, while remaining within the range o...
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