However, key challenges remain as city leaders and real estate officials push for revitalization.
"Downtown, like all of San Francisco, is on the rise," Mayor Daniel Lurie said.
City officials and commercial real estate agents point to improvements in retail occupancy as evidence of progress. The retail vacancy rate in Union Square on Thursday stood at about 15%, down from a peak of 22% in 2025. In 2019, before the pandemic, the vacancy rate was 6.4%.
Commercial real estate agent Julie Taylor of Colliers International described the shift as significant.
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"The nightmare is over. The nightmare is totally over," Taylor said.
She said activity is underway even in buildings that remain vacant.
"Every building that is vacant has something going on -- at a minimum, people touring. But a lot of them have multiple offers trading," Taylor said.
Taylor said she expects the area to fully rebound within about two years, including the Powell Street corridor, which last year experienced a retail vacancy rate of 71%. She said interest from corporations has increased this year as companies reassess the city.
"They want to tour space. They want to understand what's changed in the market. They want to know about the Powell Street improvement project. They want to know everything that our DA and our mayor are doing for Union Square and how things have changed," Taylor said.
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Interest from potential tenants has also coincided with lower lease prices, with some spaces seeing declines of up to 30%. Several major retailers are shifting locations within the area, including Zara, Uniqlo and Chanel. There are also unconfirmed reports that Nordstrom, which left the Westfield Mall, may take over the space previously occupied by Saks Fifth Avenue. As part of the effort to attract businesses, the mayor recently announced the Downtown Business Fund, which aims to provide grants and low-interest loans to businesses that lack the capital to lease space downtown.
"Helping a business open its doors downtown creates jobs, activates streets and restores confidence in the heart of the city," Lurie said.
Another major component of the revitalization effort is the Powell Street improvement project, estimated to cost between $20 million and $40 million. The project is intended to help restore Union Square as a commercial and pedestrian hub at an estimated cost of $2 to $4 million.
"It is a significant amount of money," said San Francisco Supervisor Danny Sauter. "Part of this is coming from a 2024 bond that the voters approved, we're not raising taxes with this. It's some of that bond money and some of the downtown partnership money from across business leadership realizing this is a really important corridor."
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Despite optimism around retail, downtown office vacancy remains a concern. Office space vacancy stands at about 28%, compared with between 4% and 6% in 2019. Adding to the mixed outlook, one of England's largest real estate companies, which owns property around Union Square and elsewhere in San Francisco, said last week that it is selling off part of its Bay Area portfolio.
"Those that want to depart our city, they're missing out," Lurie said.
The mayor acknowledged that progress remains fragile.
"Now, I will say this: our economy is coming back, but it's fragile, and we gotta nurture it, and we have to build partnerships like you're seeing today to keep it growing, because the rug could be pulled out from under us quiet easily," he said.