San Francisco Downtown Retail Shows Glimmers of Life
This is not to downplay the problems the neighborhood is facing.
At the end of August, Ikea opened a store in Downtown San Francisco, bucking the stream of retailers fleeing this once much-desired urban neighborhood. Specifically, the three-level, 52,000-square-foot store became the anchor tenant for a new mixed-use development that will also feature office, restaurants and entertainment. The opening wasn’t necessarily a show of support by Ikea for the beleaguered city although it has certainly raised hopes among local officials that the new store will lead to more traffic downtown. Rather, Ikea’s new San Francisco location is part of a larger expansion plan in the U.S. in which it will showcase smaller stores in urban areas instead of the suburbs where it has typically gone. The San Francisco store was among the first to open.
But the local officials may well be on to something with their hopes for Downtown. A recent report from CBRE also points to reasons for guarded optimism for the neighborhood: Economic rent, which is average rents multiplied by the occupancy rate, is up 26% from the early 2022 trough, it said.
In fact, there are glimmers of a retail recovery in many outlying San Francisco neighborhoods, such as the Mission District, where economic rent is up slightly from pre-pandemic levels, it said. Meanwhile, the recovery is even further along in San Mateo, Brisbane and other residential communities along the Peninsula. “This likely reflects home-based workers spending less on Market Street and more at neighborhood cafés,” it said. It may be that that dynamic will change – the Ikea store, for example, is located on Market Street and CBRE said it was possible it would be a harbinger of better times ahead.
None of this is to downplay the serious problems San Francisco retail is facing. Many marquee names have left the area and CBRE notes that “the combination of crime and remote work has driven many young, affluent and highly mobile workers from Downtown San Francisco, taking a heavy toll on retail districts like Union Square.” Retail economic rents in Downtown San Francisco are currently down 14% from 2019 levels, it also observed.