- By Patrick Hoge | Examiner staff writer |
- Jan 23, 2025 Updated 21 hrs ago (SFExaminer.com)
San Francisco saw more retail properties occupied than vacated for the first time in years during the latter portion of 2024, according to multiple real-estate firms.
Before news broke Tuesday that Macy’s would close its downtown Bloomingdale’s department store, analysts were compiling numbers showing that San Francisco’s retail-vacancy rate had fallen in the fourth quarter of 2024 following a record-setting third.
The City’s steadily increasing retail-vacancy rate had hit a record 7.9% in the third quarter, but it dropped to 7.7% in the fourth quarter, according to the real estate firm Cushman & Wakefield.
Kidder Mathews, another company, similarly recorded a slight drop in retail vacancies.
The trend indicated “nascent signs of recovery,” with positive net absorption of 65,700 square feet — meaning more space was occupied than vacated during the quarter for the first time in two years, Cushman & Wakefield said.
The numbers for the Union Square-Post Street area remained comparatively bleak, with the overall vacancy rate rising slightly to 22.1% in the fourth quarter, compared to 22.0% in the third quarter, the company said.
Colliers, another real-estate company, meanwhile produced a winter retail report that said pockets of The City are thriving, notably Jackson Square. Sales-tax data show that some neighborhoods such as the Inner Richmond, Mission Bay, and Japantown have surpassed pre-pandemic levels of commercial activity.
Gary Baragona, director of research for Kidder Mathews, said the positive numbers his company had logged made him “cautiously optimistic,” though he said he believes it will take multiple years for commercial real-estate markets to recover in San Francisco with so many offices still vacant and so many workers — the lifeblood for many downtown businesses — working remotely.
The City’s office market in the fourth quarter had an overall vacancy rate of 36.5%, down from a record high 36.9% for the third quarter in a sign of a recovery starting, according to real-estate company CBRE.
“We’ve seen some positive news,” Baragona said. “We just want to see that continue and [be] sustained and carry quarter over quarter, year after year, so that we can feel more comfortable that recovery is sticking and solid, and we have yet to see that.”
The Colliers report also said that flat return-to-office numbers still “present challenges” to The City, and it highlighted the potential for new Mayor Daniel Lurie to help chart a brighter future.
“A new administration prioritizing the city’s recovery through quality-of-life improvements, retail theft reduction, and business growth is set to transform San Francisco,” the report said.
Lauren Biggs, a senior client-services coordinator with Colliers, said the Bloomingdale’s news “hurt my soul,” and that she hoped the store would relocate closer to Union Square and be closer to other luxury stores such as Neiman Marcus and Saks Fifth Avenue.
Biggs said the recent retail-leasing activity pointed to better days.
“I think,” she said, ’while the change in this moment is small, it will have a snowball effect.”
The latest Union Square numbers from Cushman & Wakefield did not reflect Macy’s Tuesday announcement that it would close its more than 330,000-square-foot, five-story department store on Market Street at the edge of Union Square in the huge, largely empty San Francisco Centre mall. Its previous operators walked away from the mall in June 2023 when they stopped paying debt service on a $558 million loan.
The Bloomingdale’s news came immediately on the heels of luxury-accessories and fashion purveyor Mchael Kors also closing its shop in the mall.
Dragos Pop said he had not visited the mall for several years before coming on Tuesday looking for sports apparel, and he was shocked by the many store vacancies he saw.
“It couldn’t be more different. It’s a ghost town,” Pop said.
Though Pop said he was “pretty bullish on The City with the new mayor,” he wondered whether the condition of the mall was a “trailing indicator” of San Francisco’s recently troubled economy.
“It’s hard to steer a ship, right?” Pop said. “And so it takes a bit [of time] to see that correction. We already maybe bottomed out. But gosh, this doesn’t feel like San Francisco.”
Kazuko Morgan, an executive vice chairman at Cushman & Wakefield, said the leasing numbers likely don’t tell the whole story and might lag reality on the ground.
Morgan cited as evidence of positive momentum the recent openings of a string of luxury retail stores near Union Square, including Rolex and Patek Philippe boutiques next to a new Breitling watch shop and relocated MaxMara and Burberry shops.
The 200 block of Post Street used to be almost half vacant but now is comparatively full with tenants, she said. Morgan also said “a couple” of big announcements are in the works, though she would not provide details.
“I think having stores opened is very meaningful,” Morgan said. “And so I think those are the things we continue to feel good about.”
Morgan said the Bloomingdale’s announcement was “not good news,” but, “I don’t think it’s so devastating, because there’s always going to be somebody else that comes in eventually.”
Leasing activity in the Union Square-Post Street area had started to rebound in the fourth quarter as several retailers inked deals for both short term pop-ups and long-term leases, Cushman & Wakefield reported.
Noteworthy openings it cited included ABSteak, a Korean steakhouse by Michelin-starred chef Akira Back, in the lower level of Hotel Fusion at 124 Ellis St.
Other openings around The City included Bon Delire at Pier 3, Embarc Wines at 2 Embarcadero Center, Café Sebastian and MadLab Kakigori (desserts) by the Transamerica Pyramid, Modi at Salesforce Transit Center, Verjus (reopening) in Jackson Square and Morella and Milos Meze in the Marina. Two fitness studios also opened in that district: Hot 8 Yoga and Solidcore.
Additionally, Round1 Bowling & Arcade, a Japanese entertainment facility, opened its San Francisco location at Stonestown Galleria, occupying an approximately 50,000-square-foot space in the former Nordstrom’s basement space.
