LA Mayor in Flip Flops

OWN YOUR BLDG - Within one week, Mayor Karen Bass changed her tune.

Just last week, at the Sherman Oaks Homeowners Association debate, she said flatly that she didn’t think food vendors should operate in front of restaurants — comparing them to homeless encampments that discourage customers from going inside.

My, how things have changed.

I love Los Angeles. Its neighborhoods. Its cultures. The people who make this city what it is.

I’ve been in the Los Angeles commercial real estate market for 30 years, and I still believe in this city.

But loving Los Angeles doesn’t mean looking away from what’s happening on its streets — especially when what happens on those streets can eventually show up on your rent roll.

If you own a strip center, retail building or restaurant property in Los Angeles, here’s the question I’d be asking:

What happens to the value of your building when the businesses paying you rent have to compete against businesses operating under a different set of rules?

That’s not a theoretical question anymore.

Mayor Bass’ office confirmed this week that LAPD has been directed to stop issuing criminal citations to street vendors — and is working to dismiss citations already issued.

Her office also disclosed nearly $500,000 in city and county funding this fiscal year for a Sidewalk Vending Cart program designed to help vendors “establish or grow their businesses.”

That follows LA County Public Health pausing enforcement against unpermitted vendors earlier this year.

Whatever you think about street vending, there’s a bigger issue here for commercial property owners.

Your tenant is paying you $5,000, $8,000 or $15,000 a month in rent — plus CAM, taxes, insurance and maintenance — and now has to compete with a business operating 50 feet away without carrying the same occupancy costs or regulatory burden.

Think about the restaurant in your building.

It has rent.

Payroll.

Insurance.

Food costs.

Utilities.

Permits.

Health inspections.

ADA requirements.

Fire requirements.

Grease traps.

Parking requirements.

And probably a lease that requires the tenant to pay its share of property taxes, insurance and maintenance.

Then customers walk outside and find a cheaper meal being sold from a folding table on the sidewalk.

You don’t have to be anti-vendor to recognize the problem.

You’re changing the economics of the tenant inside the building.

And when the tenant’s economics change, the landlord’s economics eventually change too.

Maybe the restaurant asks for rent relief.

Maybe it stops expanding.

Maybe it doesn’t renew.

Maybe it closes.

Then you have a vacancy.

You pay to re-lease the space.

You offer tenant improvements.

You give free rent.

The next tenant negotiates harder because they know you need to fill the space.

Your NOI drops.

And eventually, your property value can drop with it.

That’s the part I think too many commercial property owners are missing.

The sidewalk may be public. Your building isn’t.

And if you’re collecting rent from brick-and-mortar tenants, you have a financial interest in what happens around your property.

This isn’t just a street-vending story.

It's a commercial real estate story.

(This article was written and originally published by Gary Mittin, GaryMitten.com.) photo: Gary Mittin.