[rdouble]

The rents of restaurant and residential properties seem like orthogonal issues. I have never read that San Francisco has a shortage of retail or restaurant space.

In other cities where I've lived, when a restaurant loses a lease in this manner, it's because the landlord has lined up a different tenant which they consider much higher value.

[mhjacobson]

Space is space is space.

Think about it this way: if more high-rise apartments were built, then some rowhouses (or other inefficient [in terms of people per square foot of land] housing) could be torn down. Restaurants could be built in their places.

Thus the supply of restaurant space would increase, and the average price would accordingly decrease.

[timr]

"Space is space is space."

Blah blah blah. This isn't Econ 101. We have zoning laws, so no, all space is not the same.

I haven't checked, but I'm fairly certain that the Grove's location isn't zoned for residential use. In any case, I can guarantee that isn't what the owners are planning to do with the space, given its prime location on a high-foot-traffic, retail strip.

[mhjacobson]

The zoning restricts the market somewhat, but it like anything else can be changed. Didn't mean to come across as patronizing above — sorry if I did.

One more thing... you may have misinterpreted my comment. The situation I'm imagining is not the case where The Grove is turned into a residential development. It's the opposite — some residential areas are razed and rezoned for business, driving down The Grove's rent.