HomeOthersWestfield leaves San Francisco mall, signaling more pain ahead - UnlistedNews

Westfield leaves San Francisco mall, signaling more pain ahead – UnlistedNews

Nordstrom. old navy. Anthropology. H&M. Box and Barrel.

Downtown San Francisco has seen a mass exodus of retailers in recent months, and this week a the owner of the mall has decided move away from a prominent property. Perhaps most worryingly, market analysts say the city still has a ways to go before the bleeding stops.

The city has the highest office vacancy rate of any major American city. Requested rents for commercial spaces are down 21 percent from before the pandemic. And even when tourists visit San Francisco again, the amount of money they spend in the city is 23 percent less than it was in 2019.

“I don’t think we’re in the San Francisco boom yet,” said Vince Tibone, managing director of real estate firm Green Street. “I would say we probably haven’t even hit bottom yet.”

On Monday, the owner of the Westfield shopping center said it would return the Westfield San Francisco Center to its lender, who will decide who will operate the property going forward.

Westfield’s decision to move away from the location it has owned since 2002 raised a new round of questions about how long it will take for America’s city centers to recover and the ability of retailers and mall owners to keep operating while so much.

Downtown malls have always been a rare sight, given the limited space available in city centers for sprawling commercial areas. But the ones that have been built have long relied on a steady stream of foot traffic from local residents, office workers, convention-goers, and tourists. That calculus was turned upside down during the pandemic.

San Francisco’s office market has been the hardest hit of any major city in the United States, with office vacancy rates rising to around 30 percent from 4 percent before the pandemic. This has had a severe ripple effect for sandwich shops, clothing stores, and many other merchants.

Colin Yasukochi, an analyst at CBRE, the real estate services company, predicted that the market will not bottom out until next year. The vacancies, he said in an interview, could be as high as 35 percent.

In San Francisco, the situation in the city center has been markedly different from before. During the financial crisis a decade and a half ago, rents fell 30 percent. And during the dotcom market crash at the turn of the century, business rents plummeted 70 percent. This time, the fall in rents has been much more modest, around 15 percent.

Mr. Yasukochi said that was partly due to what is sometimes described in the industry as “extending and faking.” Banks are reluctant to foreclose on delinquent properties because of the commitment required to find tenants and because they would often take over the property at a loss. Instead, they make deals with their borrowers and try to wait out the crisis in the hope that the market will change.

Will delaying tactics work? “It depends on how long you can pretend,” Mr. Yasukochi said.

In many cases, retailers in urban centers voluntarily choose to leave. In San Francisco, Nordstrom said he would close his former store in the San Francisco Center in August, leaving the mall 45 percent empty. Anthropologie closed the downtown location he owned for two decades in May.

In New York, Neiman Marcus closed its Hudson Yards store, the only one in Manhattan, in July 2020, following bankruptcy and just over a year after its grand opening. In downtown Seattle, Nike closed the NikeTown store that it had operated since 1996 in January. Outdoorswear retailer REI said it would close the store it had run in downtown Portland for two decades when its lease expired. early next year.

Foot traffic is slowly picking up in city centers, but for many retailers sales have not returned to pre-pandemic levels, making it untenable to continue paying the high rents in major city centers.

Westfield isn’t the first mall owner to decide to abandon a downtown mall in a long time. Last year, Brookfield Property Partners gave up Chicago’s Water Tower Place, the mall that anchors the Magnificent Mile, an upscale shopping district. The business district had grappled with lower foot traffic and notable retail vacancies since the start of the pandemic. More than half of the space at Water Tower Place is vacant, including a flagship store that was a Macy’s until 2021, according to Cushman & Wakefield.

In 2022, when Macerich sold his 50 percent stake in the other mall on the Magnificent Mile, Shops at North Bridge, he took almost $30 million loss.

Shopping centers, in general, are in a difficult situation. Since 2016, shopping malls in the United States have lost 50 percent of their value, according to data from the Green Street consultancy. In fact, Westfield’s decision in San Francisco is part of a broader strategy by its parent company, Unibail-Rodamco-Westfield, to greatly reduce the number of malls it operates in the country.

But analysts say the retail situation in San Francisco is being exacerbated by other factors, including concerns about shoplifting, slower return-to-office plans and the important conference economy that hasn’t yet settled. fully returned to where it was before the pandemic.

Crime had also become an issue of growing concern for retailers operating at the mall, according to a report by The San Francisco Chronicle on Thursday. In emails obtained by the newspaper, Westfield executives received updates from retailers showing incidents of violence against workers at the mall and how retail tenants had been asking for additional security.

In his statement about his decision to relinquish his ownership, Westfield said the San Francisco Center was an outlier compared to his other malls. In Downtown San Francisco, sales fell 35 percent from 2019 to December 2022. At one of the group’s malls in nearby San Jose, he said, sales rose 66 percent over that same period. . Sales at its 18 US malls rose 23 percent.

When Westfield took over the mall in 2002, San Francisco was coming out of the dotcom crisis. The urban mall was 1.5 million square feet, and Westfield poured $460 million in an expansion. At the time, residential housing was being built downtown, and online shopping was still a novel concept. The downtown food court became a draw for office workers during their lunch breaks and a novelty for tourists who were used to shopping in the street-facing shops along Market Street. Inside, they found an emporium that had large spiral escalators that transported them to several floors filled with shops.

“It was like a new attraction because there wasn’t really any mall downtown,” said Gabriella Santaniello, founder of retail consultancy A Line Partners, who lived in San Francisco from 2001 to 2007. “It was much more vibrant with commerce retail. .”

It became part of the fabric of the city. The town’s mayor, London Breed, could be seen shopping for clothes there. Willie Brown, the former mayor, is a regular at movie theaters. (This week, Cinemark announced that he was closing their theaters at the mall.)

Many San Franciscans fondly remember shopping trips to the Nordstrom store on the upper floors. Dianne Boate, a San Francisco resident who for decades ran an underground cake business, remembers buying household items: “anything that looks a little bit French.” A wealthy friend who flew into town from Florida on a private jet would make a point of going to Nordstrom for gifts.

Ms. Boate hasn’t been to the mall in years, not because of the neighborhood’s challenges, homelessness and homelessness, which she calls a “sad commentary on the times.” But at 87, she’s less interested in hoarding stuff.

“Maybe the disappearance of some of the stores has to do with people realizing they don’t need as many things,” he said of the store closures in San Francisco. “People’s interests have changed, how they want to spend their money has changed.”

Some big-name retailers like Neiman Marcus and Bloomingdale’s are choosing to stay in downtown San Francisco. Bloomingdale’s, which has a store in the mall and is owned by Macy’s, is “dedicated to providing exceptional service” in the San Francisco area, a spokeswoman said.

The exits clear the field for retailers that may have had trouble breaking into the pricey San Francisco market, said Kazuko Morgan, executive vice president of Cushman & Wakefield’s San Francisco office. Locations that have been occupied for decades are now open and tenants can apply for concessions, which is rare in the San Francisco commercial market.

“We’ve told tenants it’s a buyer’s market,” said Ms. Morgan. “Never in my career, and I’ve been doing this for a while, have we seen this type of quality real estate available. San Francisco is one of the major global cities and it obviously has some challenges right now. But we’ll get through it. Look how New York has become.”


Sara Marcus
Sara Marcushttps://unlistednews.com
Meet Sara Marcus, our newest addition to the Unlisted News team! Sara is a talented author and cultural critic, whose work has appeared in a variety of publications. Sara's writing style is characterized by its incisiveness and thought-provoking nature, and her insightful commentary on music, politics, and social justice is sure to captivate our readers. We are thrilled to have her join our team and look forward to sharing her work with our readers.


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