Report 2018-030 Recommendation 10 Responses
Report 2018-030: State Bar of California: It Should Balance Fee Increases With Other Actions to Raise Revenue and Decrease Costs (Release Date: April 2019)
Recommendation #10 To: Bar of California, State
To ensure that it maximizes the revenue from its San Francisco building, State Bar should lease all available space and ensure that its leases reflect market rates.
Annual Follow-Up Agency Response From October 2022
This recommendation is no longer relevant. The State Bar is planning to sell 180 Howard Street in early 2023 and will not be pursuing additional leasing opportunities while the sale process is underway. Additionally, the pandemic has caused a significant decline in the leasing market, with San Francisco vacancy rates over 20 percent; as a result, opportunities to secure new tenants in the short term are extremely limited.
California State Auditor's Assessment of Annual Follow-Up Status: Resolved
Because the State Bar will not be retaining its San Francisco building, this recommendation is no longer relevant.
Annual Follow-Up Agency Response From April 2021
It is the State Bar's intention to lease its vacant space at market rates, with the assistance of its brokerage team at Cushman & Wakefield. There is one remaining vacant floor. The commercial leasing market has experienced a sharp downturn due to the pandemic, with increasing supply and diminishing demand. It is not clear when the leasing market will recover.
- Estimated Completion Date: Unknown
California State Auditor's Assessment of Annual Follow-Up Status: Pending
Annual Follow-Up Agency Response From October 2020
It is the State Bar's intention to lease its vacant space at market rates, with the assistance of its brokerage team at Cushman & Wakefield. There is one remaining vacant floor. The commercial leasing market has experienced a sharp downturn due to the pandemic, with increasing supply and diminishing demand. It is not clear when the leasing market will recover.
- Estimated Completion Date: Unknown
California State Auditor's Assessment of Annual Follow-Up Status: Pending
1-Year Agency Response
The exisiting Floor 1 tenant pulled out of the deal to expand to Floor 3, due to a change in its business strategy. The State Bar's broker/property manager, was seeking new leasing opportunities for the Floor; those efforts are on hold at the moment due to the impact of the Coronavirus, which has generally caused the real estate market to slow down.
- Estimated Completion Date: Unknown
- Response Date: April 2020
California State Auditor's Assessment of 1-Year Status: Pending
State Bar has expressed its intention to implement this recommendation, but the Coronavirus has impacted that implementation. We anticipate State Bar will continue its implementation efforts as feasible in the coming year.
6-Month Agency Response
The State Bar is still negotiating with the existing Floor 1 tenant to expand to Floor 3. The tenant has agreed to finance the renovations, but this has made lease negotiations more complicated. The State Bar has signed a new market-rate lease with retail tenant to occupy the corner suite former occupied by a coffee shop. In September the State Bar awarded new contracts to Cushman & Wakefield for property management and construction project services, and for leasing brokerage services. The new contracts take effect November 1.
- Estimated Completion Date: November 2019
- Response Date: October 2019
California State Auditor's Assessment of 6-Month Status: Partially Implemented
60-Day Agency Response
In progress. The State Bar has one remaining vacant floor; lease negotiations have been underway with an existing tenant that wants to expand in the building, with an anticipated lease execution date of July 30. The State Bar is also conducting a Request for Proposal process for a new property manager and broker, and hopes to have a new contract in place by October 1. The State Bar will work with the new broker to ensure that future leases are at market rate.
- Estimated Completion Date: October 2019
- Response Date: June 2019
California State Auditor's Assessment of 60-Day Status: Pending
State Bar is negotiating a lease on remaining vacant space in its San Francisco headquarters building. Execution of that lease at a rate that reflects market rents for the San Francisco market will help State Bar maximize the revenue from its building.
All Recommendations in 2018-030
Agency responses received are posted verbatim.