JLL Tapped to Sell San Francisco's Metreon Mall

One of San Francisco’s largest downtown malls has gone on the market at a time when retail sales transaction prices appear to be heading back up in the city.

JLL has been tapped to market the leasehold interest of the 313K SF Metreon, a mall located at 135 Fourth Street, across the street from the Moscone Center and adjacent to the Yerba Buena Center.

The shopping center sits on 2.7 acres of leasehold land owned by San Francisco. There are 58 years left in the ground lease, inclusive of options, before it expires in 2082. Starwood Capital Group, the current owner and manager, acquired the complex as part of a $1.1B deal with Westfield Group for eight U.S. shopping centers in 2012.

Metreon is 92% occupied, with anchor tenants Target and an AMC multiplex accounting for 61% of the property’s total income. The remaining food and beverage tenants average $1,442 sales per square foot, representing 23% year-over-year growth, according to JLL’s marketing materials, the San Francisco Business Times reported.

According to JLL’s marketing materials, “Metreon represents a generational opportunity to acquire an iconic urban retail asset with immediate and long-term opportunities to add value and to shape the future of downtown San Francisco.”

JLL’s brochure describes what it calls the mall’s “incomparable” opportunity to generate advertising revenue when conferences are taking place at the Moscone Center: Metreon’s wall signage along Fourth Street facing Moscone West offers space for five 40-foot billboards. Advertising revenue last year was comparable to 2019′s total, the brochure said.

JLL also is touting an opportunity for investors to immediately add value through strategic leasing of first-floor vacancies at Metreon that could become future restaurants.

The Target store at the mall, one of only three Target outlets in the city, recently exercised a 10-year lease option through 2033. JLL said the Imax-equipped AMC Theater grosses about $996K per screen, which is more than twice as high as the chain’s average.

The Metreon also features City View, a 31K SF rooftop event venue with floor-to-ceiling windows overlooking the skyline. City View generated $1.8M in revenue in 2023, about $38,500 per event.

The vacancy rate in San Francisco’s retail market rose 130 bps in the third quarter to 7.7% from the Q2 level of 7.5% while average asking rates dipped to $28.80 from $32.64 the previous quarter, according to the latest market report from Kidder Mathews.

In a retail market that has had no new supply in the past 12 months, negative net absorption stabilized in the third quarter, coming in at about minus 92K SF, a significant rebound from the minus 744K SF in Q2 2024.

Average investment sales prices, which dipped to $330 per SF in Q2 2023, came in at $445 per SF in the third quarter, up from $355 per SF in the previous quarter, but well below the pre-pandemic average of nearly $700 per SF in 2019.

Perhaps the most hopeful sign that downtown San Francisco is on the verge of recovering from a trough that saw an exodus of retailers from large spaces, particularly in Union Square, was the priciest retail sales transaction in the city in Q3 2024.

The nearly century-old four-story Union Square building that has long been home to British luxury fashion house Burberry was acquired by a group of investors trading as 225 Post LLC for $17.4M, or about $929 per SF.

The price represents a 5% increase over the $16.6M then-Burberry parent GUS PLC paid for the retail building in 2001.