San Francisco’s local neighborhoods are experiencing a patchwork recovery from several years of high-profile closures and vacant storefronts downtown, with revitalization happening unevenly throughout the city, according to experts.
Retail Activity Flourishes in Neighborhoods as Downtown Faces Ongoing Recovery
San Francisco’s retail environment is undergoing a transformation after over five years marked by widespread store closures and dwindling foot traffic in its central shopping hubs. Observations of various retail thoroughfares reveal both thriving businesses and empty windows, with vibrancy especially prevalent outside of downtown areas.
There is a noticeable shift, as commercial real estate professionals describe the current retail climate. Avison Young’s principal and director of retail market intelligence, Meghann Martindale, explains that retail demand has become “hyper-local”. In her words, “neighborhood to neighborhood can completely change the customer profile, spending power, and retailer performance.” She highlights that the strongest parts of the retail sector now grow from solid local business ecosystems, rather than relying solely on a revived downtown core.
City Center Loses Major Retailers as Closures Continue
Although challenges in downtown shopping districts existed before the pandemic, the COVID-19 outbreak in 2020 greatly expedited store closures. That year, Gap—founded in San Francisco—permanently shuttered both its Embarcadero Center and Flood Building flagships. The following years saw continued departures; in 2023, Nordstrom closed both its flagship and Rack stores on Market Street, intensifying concerns about downtown’s challenges. These exits have been linked to a sharp decline in visitors and downtown workers, resulting in Market Street and Union Square filling with “for lease” signage.
According to Lonnie Hendry, chief product officer at Trepp, a provider of commercial real estate data, “What we’ve learned is just how interconnected these different property sectors really are… when office attendance dries up, then all of your downstream businesses — your stores, your restaurants, your gyms, even your apartment complexes — those businesses suffer significantly.”
San Francisco Centre Serves as a Microcosm of Downtown’s Turmoil
The trajectory of San Francisco Centre highlights the depth of downtown’s retail difficulties. In 2023, Westfield gave up control of the shopping center to its lender as both sales and visitor numbers plummeted. The situation deteriorated further when tenants, including American Eagle, sued the ownership, alleging neglect and failure to address criminal activity. Despite efforts by new management, such as a brief rebranding and a postponed auction, the fate of the mall remains unknown. The situation worsened as Bloomingdale’s exited the property, and although negotiations with two financial firms took place this year regarding a purchase, the sale ultimately collapsed, placing the Centre back on the market.
Martindale reflected on the mall’s earlier prosperity, noting it was “built for a different era,” when the nearly one million square feet of retail space thrived on a steady stream of office workers, visitors, and shoppers. She described its closure as “both sobering and deeply sad, while leaving a large void in the heart of the City.”
Union Square and the Office Market Offer Positive Signs
Union Square’s decline started years before the pandemic, as Macy’s Inc. closed its menswear store in 2016 and questions lingered regarding the flagship location’s future. The departures of Barneys in 2019 and Saks Fifth Avenue in 2023 further contributed to the area’s retail loss. Yet, luxury brands and newer, more affordable retailers continue to keep Union Square active. According to Martindale, these transitions have potential to “energize and draw a new customer to the Square overall.”
Trepp’s research has signaled early evidence of downtown retail’s recovery, helped by a recent increase in office leases often related to expanding AI companies. New office and retail leases, particularly for smaller spaces, are being arranged, with Lonnie Hendry observing, “there’s a hint of optimism in the air… People’s immediate reaction is no longer negative when you say ‘San Francisco’ or ‘San Francisco retail.’”
Neighborhood Shopping Streets Power the City’s Retail Comeback
Despite turbulence, neighborhood shopping areas have maintained strength. Hayes Valley, Upper Fillmore, Pacific Heights, and Chestnut Street have become hubs for a combination of independent shops, restaurants, and national retailers, drawing crowds and momentum away from struggling central districts. In Martindale’s view, “Downtown/Union Square vs the neighborhoods… they tell two very different stories about foot traffic, demand drivers, and retail concentration.”
Hendry observes property owners are now adapting strategies from thriving neighborhoods, adding restaurants and service options alongside retailers to create destinations. He notes, “A mix of local nuance combined with some of the national retailers… is the kind of experience that encourages people to spend a day in the area.”
Future Outlook: City’s Resilience Stands Out
Real estate industry experts remain hopeful despite the city’s past retail challenges. Hendry summed up the sentiment: “San Francisco is an economic engine… it is not immune to market cycles. But if you just look at history — San Francisco is a gateway city. It has too much entrepreneurial spirit to be down for too long. I’m never betting against San Francisco.”