Analysis: Why empty storefronts line San Francisco's Castro neighborhood

SAN FRANCISCO (KGO) -- Although the economy is robust in the Bay Area, one San Francisco neighborhood seems to be falling behind.

Our partners at San Francisco-based news site Hoodline found a lot of empty storefronts in the city's Castro District. The retail occupancy rate in this particular neighborhood is 87 percent.

Comparatively, citywide, San Francisco's occupancy rate is one of the highest in the country at 97 percent. So what's going on here? It's a neighborhood where rainbows don't just fly from flagpoles. The streets are paved with pride, too.

"It's a fun neighborhood, interesting neighborhood," said Castro Merchant's Association President Daniel Bergerac. He owns Mudpuppy's, a successful dog grooming business that's been around for six years on Castro Street. "It was, 'Find a need and fill it,'" he recalled.

Not all retailers in the Castro can say the same.

HOODLINE: It's a fact: The Castro's retail vacancy problem has gotten even worse

If you take a walk around the neighborhood, you'll see the evidence -- empty storefronts that are locked up tight. Some businesses have relocated while others are possibly gone for good. They range from restaurants to retail.

"A lot of times it feels like three steps forward, one step back," said Bergerac. "There's always going to be challenges."

According to our partners at Hoodline, there are 53 vacant storefronts in the Castro. Occupancy rates in the neighborhood were 92 percent in 2015. They dropped to 87 percent in 2017.

Interactive map: Castro vacancies 2015:

It's not just small businesses that have packed up and gone, even corporate chains have called it quits. A CVS on Market Street closed last week after being open only a year. The company says it under-performed and is 1 of 70 to close nationwide. "CVS is definitely a blow," said Bergerac.

So, why are there so many vacancies?

High rents have priced many retailers out of business. In the Castro, monthly rents range from $5,000 to $50,000 per month, depending on the space.

"Rents are getting higher, (it's) tougher to make a buck," said Castro business owner Phil Rennick. He owns "Active Nutrition" on Market Street, where he's noticed foot traffic drop off over the past 10 years as more tech workers, who are not interested in shopping at brick and mortar stores, move in. "It's been a struggle up against the internet like other retailers," said Rennick. "Amazon has taken a big hit."

Interactive map: Castro vacancies 2017:

"People really want a Trader Joe's," said neighbor Danny Yadegar. He says many people want better options for grocery shopping, in a neighborhood that's changing. "A lot of people are talking about the transition of the Castro, is it becoming more gay? Less gay? At the end of the day, retail goes through transition," he said.

But there's good news -- nine new businesses are expected to open in the coming months in the Castro.

San Francisco Supervisor Jeff Sheehy wants to make it easier for new business owners by streamlining the permit process, which can take up to a year. "The whole time they're waiting to open their business, they're paying rent," he said. "That can fundamentally change the economics of a business."

"What I know is the entrepreneurial spirit will overcome this," said Bergerac, who is hopeful. He'd like to work with landlords on setting realistic rents to allow more small business owners to fill the void in a world famous neighborhood.