San Francisco’s Downtown retail market took a hit but is not down for the count following the announcement last week that the struggling San Francisco Centre will lose anchor tenant Bloomingdale’s this spring, retail agents said.
The well-publicized trouble keeping tenants at the Market Street mall since Westfield and Brookfield walked away from their $558-million loan on the property in 2023 helps inoculate the rest of Downtown from bad closure news, agents noted.
“The closure of Bloomingdale’s has not been a surprise to anyone in the retail business. We’ve been watching the challenges facing San Francisco Centre unfold in real time,” said Maven retail agent Ali McEvoy, who was once part of the leasing team at the Centre and currently has numerous Union Square retail listings.
With Bloomingdale’s leaving its 330,000-square-foot space 20 years before its lease expires in 2046, Zara is now the mall’s largest tenant. Its lease for 28,000 square feet in the 1.5 million-square-foot shopping center is up in 2027. Foot traffic in the mall was down by nearly a third during Black Friday weekend in 2024 compared to 2023, according to Placer.ai data.
A representative for the mall declined to comment on Bloomingdale’s departure or what it could mean for the center’s upcoming sale via auction, first scheduled for last November but pushed back repeatedly and now set for Feb. 20.
While Union Square is part of the same larger retail market as the Centre and will feel some impact from Bloomingdale’s closure, high-end, smaller-format retailers are still in the market signing leases, McEvoy said. The stores leaving the San Francisco Centre, which most recently also include Michael Kors, may even relocate there in an effort to maintain their customer base, she added.
Bloomingdale’s boomerang?
Could those smaller relocations include Bloomingdale’s? Possibly, especially given that it is owned by Macy’s, which has already said it was looking to close its flagship store in Union Square as early as this year. It could move higher-end Bloomingdale’s into the space if it can’t find a buyer for the 400,000-square-foot store, the agents said.
A Bloomingdale’s spokesperson did not reply to a request for comment about the department store’s future in San Francisco but did say in a statement that the “vibrant city has been home to the brand for nearly two incredible decades” and that, “we are hopeful to be back to serve the San Francisco community in the future and look forward to introducing new ways to provide enhanced service to our loyal local shoppers.”
“If you read between the lines, they didn’t 100 percent say ‘Thanks but no thanks,’ like ‘We had a good run in San Francisco, goodbye San Francisco.’ That’s somewhat optimistic,” said Cushman & Wakefield retail agent Kazuko Morgan.
The warmer sentiment towards the city already sets Bloomingdale’s apart from Nordstrom, which left the San Francisco Centre in 2023 and closed two Nordstrom Rack locations as well. It knocked the city on its way out the door, with a spokesperson citing “dynamics of the Downtown San Francisco market” for impacting customer foot traffic and therefore Nordstrom’s “ability to operate successfully.”
Macy’s also has closer ties with the city than Nordstrom did, given that the history of its Union Square flagship goes back to the 1860s. Plus, it owns its building and once took up more than 1 million square feet in Union Square.
“I think that relationship is still very much ongoing versus the relationship with Nordstrom and the city, where they had that presence and that was it,” said CBRE retail agent Alex Sagues.
Even if Bloomingdale’s came back to San Francisco, it certainly would not need the same square footage, the agents said, as department stores in cities nationwide are cutting space amid the growth in online sales.
“You just don’t need to be the same size that you were 20 or 30 years ago,” said Morgan, who added that a smaller Bloomingdale’s would be more likely to re-appear in the luxury-shopping-oriented square than in an outlying San Francisco location like Brookfield’s Stonestown Galleria, which she said has a reputation as more of a dining and entertainment destination.
Even Nordstrom is coming back to the city, Morgan pointed out, albeit in a significantly smaller footprint. It plans to open a 1,700-square-foot Nordstrom Local — which doesn’t have inventory, but offers online pickups and returns, as well as alterations — on Fillmore Street in Lower Pacific Heights.
Downtown discounts
With prime retail neighborhood corridors like Fillmore, Chestnut, Hayes and Jackson nearly full, and Downtown spots available at a discount, more retailers are exploring what they can get in the city’s core, the agents said.
Before the pandemic, Sagues explained, it would have been unthinkable for owners in a luxury retail destination like Union Square to arrange a lease based on profit sharing. But that arrangement has become fairly common as owners want to get their ground-floor spaces filled with a business that’s going to add value to their overall buildings more than they want to wait it out for top-dollar rents. Some owners are even offering free spaces to the pop-up program Vacant to Vibrant, as it expands to Union Square after gaining traction in the Financial District.
Sagues said he knows of deals that aren’t public yet where tenants who have been “out of the mix” in the city for a few years have come back and negotiated leases Downtown. Other companies that have never had a presence in the city — like Nintendo, which will open its second U.S. location this year next to the Westin St. Francis on the square — are also signing deals.
“It’s a delicate balance of entering the market at the right time to get the beneficial economics but not too early that you’re not able to operate sustainably,” he said. “That’s what all these retailers are trying to figure out: Are we in recovery? How long is the recovery going to take?”
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