SAN FRANCISCO (KGO) — Downtown San Francisco is showing visible signs of improvement, with cleaner streets, increased foot traffic and a declining retail vacancy rate.
But while conditions have improved since the depths of the pandemic, business leaders and commercial real estate experts say the recovery remains uneven, particularly outside the Union Square district.
Union Square’s retail vacancy rate peaked at nearly 23%, according to city officials. Today, it stands at slightly above 15%, a notable improvement but still well above the 6.4% vacancy rate recorded in 2019 before the pandemic.
“We’re getting a huge refresh. Imagine you’re gutting and remodeling your house. You’re buying all new furniture and a new roof, and new landscaping. That’s what we’re getting in Union Square,” said Julie Taylor of Colliers International, a global real estate company.
The improving outlook has convinced some retailers to return. Among them is Uniqlo, which closed its Powell Street store in 2021 and is set to reopen nearby at 801 Market St. on Oct. 9.
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“This was years, years of conversations. I will give Uniqlo credit for really being ahead of the curve and seeing what a lot of others did not see: the recovery of San Francisco happening and being an early mover,” said Alex Sagues, senior vice president at CBRE.
Commercial real estate professionals point to reduced retail theft as one of the primary reasons businesses are once again considering downtown locations.
“We have several tenants who just told us in the last few weeks that ‘we’re so much happier. We’ve been able to reduce the amount of security,’ or ‘Our employees are happier because they’re not dealing with people throwing stuff in their bags.’ They want to feel safe,” Taylor said.
The recovery, however, becomes less visible farther east along Market Street toward the Embarcadero. There, vacant storefronts remain common, and some are occupied at night by unhoused individuals. Business owners say issues related to homelessness, mental illness and public disorder continue to affect customer perceptions of the area.
“Yes, I do struggle. Personally, I do struggle with that. I don’t think we’ve done a very good job in the past of taking care of our homeless and the mental illness issue that we have,” said Jaime Patrick, owner of Patrick & Co. Stationery.
Commercial brokers acknowledge that public perceptions of safety and cleanliness directly influence where businesses choose to invest.
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“Ultimately, people are renting space because they want to be where their consumer is. So, anything that keeps the consumer away is also, in turn, going to keep them away,” Sagues said. “With that said, I don’t think the problem is as bad as some people think. We had this problem for a long time. It’s a problem that a lot of urban environments and a lot of big cities in the U.S. have.”
Despite ongoing challenges, some businesses continue to open along Market Street, betting on the district’s longterm recovery. Patrick said conditions outside his business, while still imperfect, have improved.
“Yes, and to be honest, it’s gotten a lot better,” he said.
Mayor Daniel Lurie said downtown’s trajectory is moving in the right direction, though significant work remains.
“We have seen an improvement downtown by every metric, and I’ll be the first to say we have a long way to go. We still have too many issues on our streets, too many vacancies,” Lurie said.
Not all vacant storefronts reflect a lack of demand. Real estate experts note that many high-profile spaces remain unavailable because former tenants continue paying rent through the expiration of their leases despite having closed their businesses.
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“A lot of the closed Walgreens and the closed Targets downtown, they are still paying rent, so the landlord can’t actually lease that space,” Taylor said.
Industry observers say additional momentum could come from a planned $42 million streetscape improvement project on Powell Street, scheduled to begin in November. The corridor is already attracting interest from prospective tenants.
“Powell Street has more activity from a leasing stand point than any other block in the district. Touring, making offers, Powell Street, the momentum is really building and people are excited about the investment the city and the community have made,” Taylor said.
Although downtown has not fully recovered from the pandemic-era downturn, business leaders and city officials say improving public safety, declining vacancy rates and new investment projects are contributing to a growing sense of optimism.
As Taylor put it: “To be continued.”
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