San Francisco’s downtown core, once a bustling hub of commerce and urban life, is grappling with an unprecedented retail crisis, epitomized by the financial collapse of its most prominent shopping destination, the San Francisco Centre. The former Westfield Mall ceased making payments on its substantial $558 million loan in June, effectively relinquishing ownership and casting a long shadow of uncertainty over its future. This pivotal event underscores a broader “retail exodus” that has seen nearly half of the stores in the city’s downtown shopping district shutter their doors since 2019, according to findings by the San Francisco Standard in May. The closure of well-known brands such as Whole Foods, Old Navy, and Nordstrom, among others, paints a stark picture of a major metropolitan center in distress, prompting a deep dive into the complex forces at play.
The decline of the San Francisco Centre, previously a source of civic pride, is particularly illustrative of the downtown area’s struggles. Data from location analytics company Unacast vividly illustrates the precipitous drop in foot traffic around the complex. In December 2019, at the height of the holiday shopping season, the mall welcomed an estimated 668,000 visitors. By December 2023, this number had plummeted to a mere 265,000 visitors, representing a staggering decline of over 60%. Annual visitor figures also reflect this downturn, falling from 6.43 million people in 2019 to 2.24 million in 2021. Escalators, pathways, and even entire floors that once teemed with shoppers now appear largely bare, transforming the vibrant landmark into a shadow of its former self.
The departure of anchor tenants has accelerated the mall’s tailspin. Nordstrom, a key draw, announced its plans to close its downtown San Francisco stores in May, citing that “the dynamics of the downtown San Francisco market have changed dramatically over the past several years, impacting customer foot traffic to our stores and our ability to operate successfully.” Following Nordstrom’s August 2023 closure, which vacated over 300,000 square feet, co-owner of Nectar Supply, Brian Politron, remarked that the mall had become “a ghost town.” More recently, Bloomingdale’s, an anchor tenant since 2006, also closed, described by one Razer sales associate as “the last straw,” noting the store was only seeing “seven to ten customers a day these days.” This string of high-profile exits, including Adidas, J. Crew, Aldo, Rolex, and Razer, has reportedly left the mall at a meager 25% occupancy, with little left to attract visitors beyond its food court.
Experts and former downtown store owners interviewed by ABC News emphasize that the challenges facing San Francisco extend beyond simplistic narratives often focused on crime and homelessness. Wade Rose, president of the business advocacy group Advance SF, encapsulated this sentiment by stating, “It’s all of the above,” and adding, “These dynamics are bigger than the city.” He clarified that crime, while a significant concern, “makes up part of the narrative. It isn’t the full narrative.” Indeed, a confluence of macroeconomic shifts, pandemic-induced behavioral changes, and specific local policies has converged to create the current predicament.
One of the primary drivers of reduced foot traffic is the widespread adoption of remote work, a trend particularly pronounced within the Bay Area’s dominant tech industry. This shift has drastically slashed the number of office commuters who previously formed the backbone of downtown’s lunchtime business and after-hours shopping activity. The physical absence of these daily workers has reverberated throughout the retail and dining sectors, leaving streets and establishments notably emptier. This prolonged reduction in daily visitors has translated directly into significantly diminished sales, a correlation highlighted by Rose who observed, “A massive reduction in foot traffic translates into a significant reduction in sales.”
Furthermore, the pandemic exacerbated a “longstanding shift away from brick-and-mortar retail” that was already underway. The accelerated pivot to e-commerce during lockdowns fundamentally altered consumer habits, with many shoppers opting for online channels over physical stores. Denise Forbes, co-founder of California Girl Jewelry, recounted an 80% drop in revenue in 2020, forcing her company to shift entirely to e-commerce and ultimately close her downtown store, reopening in Marin County. “It was such a goal to have a business in San Francisco,” Forbes lamented, “Then it turned out to be such a real disappointment.”
Perceptions of safety have also played a critical role in deterring downtown foot traffic. Some shoppers report a diminished sense of security, contributing to their reluctance to visit the area. While crime statistics present a mixed picture — homicides have climbed nearly 8% and robberies risen about 12% this year compared to 2022, while rapes have fallen almost 24% and assaults nearly 5% — the perception of unsafe street conditions has been powerful. Compared to pre-pandemic 2019, homicides are up 27%, though robberies are down almost 6%. Whole Foods, for instance, closed its flagship downtown location in April 2023 “to ensure worker safety,” citing concerns over shoplifting incidents and the conditions outside the supermarket. This phenomenon, as Rose noted, creates a vicious cycle: “The steep decline of foot traffic downtown during the pandemic heightened a perception of safety risk, which in turn deterred the flow of visitors needed to ease the dismay.”
Read more about: San Francisco’s Downtown Retail Exodus: The Full List of Major Stores Pulling Out Amid Rising Crime and Vacancies
Beyond the immediate concerns of crime and safety, the economic landscape of San Francisco has also contributed to the unraveling. The city’s exorbitant cost of living has made it untenable for many “regular people” from various walks of life. Prior to the pandemic, the median rent stood at $4,500, nearly three times the national average, and homes averaged $1.3 million, 4.4 times the U.S. median list price. When housing costs reach such heights without adequate new construction, essential workers like teachers and nurses find it increasingly difficult to reside in the city. This exodus of a diverse working population inevitably impacts the vibrancy and customer base of downtown retail. Marc Joffe, a former Federalism and State Policy Analyst at the Cato Institute, ties some of these issues to “poor government policy and execution.”
Joffe further highlights the impact of pandemic-era policies, noting that the Bay Area imposed lockdowns earlier and maintained severe restrictions longer than other regions, delaying a full reopening until June 2021. Cable car service was suspended from March 2020 until August 2021. This prolonged closure, coupled with what Joffe describes as public health officials and local media exaggerating “the risks from Covid infection to younger healthy individuals,” resulted in fewer people returning to downtown San Francisco long after official restrictions were relaxed. Additionally, a “crime wave exacerbated by state and city initiatives to house homeless individuals in area hotels” further strained the downtown environment.
Adding another layer of complexity, many key downtown properties, including the San Francisco Centre, are encumbered by securitized mortgages known as single asset single borrower commercial mortgage-backed securities (SASB CMBS). The mall’s mortgage has been in default since June 2023, pushing it into receivership. The foreclosure auction has been delayed multiple times, now slated for June 17, underscoring the difficulties in resolving such situations. This complex financial web contributes to the prolonged state of “no proactive management for over a year” for the mall.
The intricate structure of CMBS deals means that various parties—the special servicer, receiver, interim property managers, and attorneys—receive monthly fees, creating little incentive for a swift resolution. Unlike a bank-held mortgage where specific employees would work to limit losses, CMBS involves bond investors, many of whom have already been “wiped out.” Junior bondholders cannot expect proceeds, and even AAA-rated investors often lack the expertise or bandwidth to monitor such specific portfolio holdings, as exemplified by the Victory Core Plus Intermediate Bond Fund’s minor investment in DBJPM 2016-SFC Class A.
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The ripple effect of these CMBS challenges extends beyond the San Francisco Centre. Within a short walk, two large hotels, the Hilton San Francisco Union Square and Parc 55 Hotel, comprising 2943 rooms, are also facing foreclosure after defaulting on a mortgage backing another SASB CMBS deal. These hotels, suffering from an occupancy rate of just 45.5% for the year ended September 30, have been impacted by adverse street conditions deterring convention organizers from booking the nearby Moscone Center, further reducing business travelers. Their mortgage has been in default since June 2023, with a sale not expected until next year. Joffe critically states that “the race to the bottom in credit standards continues,” indicating a systemic issue exacerbated by current market conditions.
Despite the prevailing challenges and the undeniable crisis, some voices express cautious optimism and point to nascent signs of a potential turnaround. Mayor London Breed, while acknowledging San Francisco’s difficulties, has “faulted a disproportionate focus on exits from the city,” urging attention to “the people who are staying, expanding, coming to San Francisco.” Ted Egan, San Francisco’s chief economist, offers data-driven encouragement, noting that sales tax revenue in San Francisco grew faster than statewide in most categories during the first three months of the year. Casual dining receipts, for instance, were up 23% on a non-inflation adjusted basis compared to 10% statewide, with solid growth also observed in electronics and appliances. Sales at the Union Square shopping neighborhood, specifically, saw a 7.4% increase over the same period compared to 2022.
Indeed, there are tangible signs of new investment and revitalization efforts. Global fashion giant Zara plans to open a “huge, huge” four-story flagship store at 400 Post St. in Union Square, spanning some 40,000 square feet—nearly double its current downtown presence. Mayor Daniel Lurie, announcing the news, declared, “Union Square is on its way back! San Francisco is on its way back!” The long-awaited second U.S. store for video game giant Nintendo is also set to open in Union Square on May 15. Colliers broker Julie Taylor reports an increase in leasing momentum, with “offers on five different buildings” and daily tours.
City officials and local business groups are actively working to address the issues. Mayor Lurie has announced the creation of a “hospitality zone” task force aimed at supplementing police efforts to boost public safety downtown. The NBA All-Star Game in February provided a temporary boost, transforming Powell Street into “All-Star Alley” with retail pop-ups and events. Footwear giant Shoe Palace capitalized on this, staging a splashy event to promote its move into 16,000 square feet at 301 Geary St. The nonprofit Union Square Alliance is also staging special events and public art to attract shoppers and retailers.
Looking ahead, the path to a full recovery for San Francisco’s downtown will likely require significant reimagining. Wade Rose envisions a business recovery focused on ensuring safety, reducing apartment rents, and building parks and other attractions to draw “fun-seeking visitors” who could replace the lost commuters. Mayor Breed previously floated the idea of converting the San Francisco Centre into an urban soccer stadium, while real estate experts have suggested transforming the foreclosed hotels into apartments to address the city’s housing shortage. These bold pivots, however, are contingent upon the transfer of these properties to new owners equipped with the necessary resources and motivation to implement such ambitious turnaround plans.
Read more about: San Francisco’s Downtown Retail Exodus: The Full List of Major Stores Pulling Out Amid Rising Crime and Vacancies
The future of San Francisco’s downtown retail landscape remains intricate and challenging, defined by systemic economic shifts, local policy impacts, and the profound aftermath of a global pandemic. While the city’s most prominent mall endures an uncertain fate, the collective efforts to inject new life, alongside the emergence of new investments, suggest a complex recovery narrative. As Wade Rose aptly stated, “There’s no silver bullet,” leaving the pertinent question for San Francisco: “What’s next?” The city stands at a critical juncture, necessitating sustained strategic intervention and adaptability to redefine its urban core for a new era.
