Businesses Say Goodbye to San Francisco

A look into San Francisco’s recent retail exodus. 

image c/o Lea Suzuki/The SF Chronicle 

By Anthony Romero
News Reporter

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The retail exodus of San Francisco's downtown continues as businesses continue to announce their closings in the coming year. The Westfield Mall, a staple of the city for over 20 years, is among one of the most significant losses to the once-bustling shopping hub following its owner’s announcement to return the property to its lenders this past June. This decision follows the closure of the mall’s flagship Nordstrom store, which shuttered the doors of its Westfield location and its Rack store in late August. This worrisome trend does not seem to be stalling, as the likes of Old Navy, Whole Foods, and Anthropologie have joined the slew of businesses leaving the city.

With the rapid closures of such prolific SF business fixtures, the city’s retail future looks bleak. A study by the University of Toronto saw San Francisco ranked last on a list of 62 cities, being reported to have received about 32% of a return to pre-pandemic levels of business (AP, 2023). The Los Angeles Times cited a Cushman & Wakefield study that saw San Francisco’s retail vacancy rate increasing to about 6% since the beginning of 2023, the highest it has been since 2006; Union Square has also reflected record-breaking vacancies in the first quarter of 2023, rising to a 15.5% rate in comparison to the previous year’s report of 14.2% in its last quarter (LA Times, 2023). On the ground, this translates to downtown San Francisco losing almost half of its businesses, and only 53% of the surrounding stores remain as of May 2023. This mass retail exodus, combined with the city’s increasing criminal element and the shrinking presence of large tech companies has led many to ponder whether the city of San Francisco is poised to remain in a “doom loop” that will hinder its growth.

With the COVID-19 pandemic proving to be a prominent factor in San Francisco’s downtown decline, a common pattern in retail executives’ closure announcements is the implication that the city’s rising property crime and homelessness crisis has severely deterred foot traffic. Nowhere is this more apparent than in Whole Foods Market’s case, which despite opening in the hopes of catering to tech employees, was instead a constant figure on local news outlets chronicling its numerous cases of shoplifting and property damage. After only a year of operation, Whole Foods announced its closure in mid-April over concerns for the safety of its employees; this mirrors Nordstrom’s decision to shut its doors, describing "unsafe conditions for customers, retailers, and employees" in the downtown area. In an NRF survey held in May of this year, 53% of consumers reported feeling that violent cases of looting and shoplifting have increased since the pandemic (Forbes, 2023).

This widespread loss has sparked a greater conversation by city officials about San Francisco’s role in policing and public safety, with Mayor London Breed responding to these concerns by increasing the presence of police and civilian ambassadors at the city’s larger retail centers (Wall Street Journal, 2023). Crime is not the sole factor for this exodus, as it is apparent that mass layoffs at corporate giants like Twitter, Google, and Salesforce and the increase of work-from-home employees have significantly cut down SF’s expected customer base. The lack of office commuters during prime hours of operation has essentially turned downtown into a ghost town, expediting the perception of the city being overrun by the homeless and open-air drug use. Most retailers are now transitioning away from the city to the greater Bay Area, with the Silicon Valley region being a safe haven for companies like Nordstrom to restart. “[ ]... the downtown San Francisco market has changed dramatically over the past several years, impacting customer foot traffic to our stores and our ability to operate successfully,” chief stores officer Jamie Nordstrom commented, “With both leases set to expire… we believe we can better serve our customers there by focusing on our 16 nearby Nordstrom and Nordstrom Rack locations, as well as online.” This is reflected in Nordstrom’s current plan to remain in the region but away from the San Francisco downtown, with a prominent store being located at the Westfield Valley Fair Mall in San Jose.

With these problems remaining central to San Francisco’s struggle to recover its pre-pandemic growth and opportunity, city leaders look towards potential solutions. According to the Associated Press (2023), city supervisors aim to restructure downtown zoning rules to promote mixed-use spaces in the city’s empty storefronts, including office-to-housing projects. Economist Ted Egan outright denies the doom loop narrative, providing sound data that recorded improvements to in-person sales, as well as a progressive 23% rise in the sales tax revenues of San Francisco restaurants and a 7.3% rise in sales at Union Square (ABC News, 2023). As of a report in May, Mayor Breed has also proposed a $6-million investment to restore the strip on Powell Street that has seen the most retail departures. 

Although things look dire from the “doom loop” perspective, it remains to be seen whether San Francisco city officials will begin to provide solid results that allow the city and its residents to see the light outside of the tunnel. As of now, San Francisco faces significant pressure to adapt to the growing exodus of retail stores and companies, but only time will tell if the city can restore its economic center.


Sources:
Insider 
https://www.businessinsider.com/san-franciscos-union-square-store-closures-since-2020-2023-5#:~:text=At%20least%2017%20retailers%20have,to%20shoplifting%20and%20other%20crimes.
AP https://www.businessinsider.com/san-franciscos-union-square-store-closures-since-2020-2023-5#:~:text=At%20least%2017%20retailers%20have,to%20shoplifting%20and%20other%20crimes.
ABC News
https://abcnews.go.com/US/san-franciscos-retail-exodus-crime-experts/story?id=101100884
LA Times https://www.latimes.com/california/story/2023-05-29/san-francisco-business-closures-openings-downtown-union-square
Wall Street Journal https://www.wsj.com/articles/san-francisco-centre-mall-turned-over-to-lender-482bb4bf
Forbes
https://www.forbes.com/sites/pamdanziger/2023/06/14/westfield-mall-joins-the-mass-retail-exodus-out-of-san-francisco/?sh=630dd485995b
The SF Standard
https://sfstandard.com/2023/05/18/san-francisco-union-square-store-closures-pandemic-fallout/
The NY Times https://www.nytimes.com/2023/04/30/us/san-francisco-whole-foods-crime-economy.html?searchResultPosition=3
TIME https://time.com/6270788/whole-foods-san-francisco-closing/