SF Union Square on path to economic recovery: Here are the signs and roadblocks

Friday, June 21, 2024
SF Union Square on path to economic recovery
Here are the signs and roadblocks for San Francisco's Union Square as it makes its journey to economic recovery.

SAN FRANCISCO (KGO) -- For generations, San Francisco's Union Square was the retail epicenter of the Bay Area.

The pandemic, changes in shopping habits and work-from-home left a huge number of storefronts empty. But there are now signs the area is on the road to recovery.

ABC7 News Building A Better Bay Area Reporter Lyanne Melendez talked to the person who knows Union Square best about what we can expect. Her name is Kazuko Morgan, executive vice chairman of Cushman and Wakefield.

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Lyanne Melendez: "Your name is everywhere here in Union Square. That must be a heavy burden on you."

Kazuko Morgan: "It's not a real burden, but it's a responsibility to make sure that we continue to have the great quality and variety of retailers."

Melendez: "So where is San Francisco today? Because I see a lot of 'for lease' signs."

Morgan: "So, Union Square is in a much better place that it was four years ago."

According to Cushman and Wakefield, the current vacancy rate in Union Square during the first quarter of this year was a little more than 20%. But Morgan told us spaces are being leased or in negotiation, even though the signs have not been taken down.

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Melendez: "Why not then put 'Just leased," like 'Just sold this house'?"

Morgan: "This market tends to be a lot more understated. Tenants don't like to announce until they're ready. You cannot control the permit process. There are delays."

So behind a "for lease" sign, there may already be a tenant waiting to move in.

Case in point, the new Nintendo store will be housed at a location on Powell Street, which still has a "for lease" sign.

But keep in mind that at the peak, in 2016, the vacancy rate around Union Square was only 3%.

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Melendez: "I hear people say, 'Wow, London is thriving, New York is back and San Francisco, not so much.' So, what's it going to take?"

Morgan: "I think it's a combination of things. Number one is the negativity of the press. It's definitely not what you see today. I can't tell you how many people come, they come and visit. They're like, 'San Francisco is great. What's everybody talking about?'"

Other industries, like tourism, are expected to eventually bring business back to this location.

Morgan: "The convention business, this year was a down year. But in the coming years, that will increase as well, and I think, most importantly, is our office workers."

Melendez: "But people are not going to come back, they told me. Do you work from home?

Morgan: "No, I don't."

Melendez: "Neither to I. So how are we going to change that mindset?"

Morgan: "I think it comes from the top down."

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But even some city workers are still working from home a few days a week, despite Mayor London Breed's insistence that they come back in person five days ago.

To get the perspective of the office real estate market, we turned to Mark McGranahan of Avison Young, a large commercial real estate agency in San Francisco.

"We're four days a week. I agree with you the city has to lead by example and we're have that conversation with a lot of our big companies that we represent here," McGranahan said.

He is a firm believer that residential housing downtown will help turn things around.

"We need more residential housing in downtown San Francisco. I just came back from New York, Chicago, and there's much more housing, what then creates more retails, which then creates more activity and gets people more confident and comfortable to be here," McGranahan said. "So, if we have conventions, we have visitors and more housing, that's just going to create the right fabric to get those small businesses going."

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