Shifting Ground In San Francisco Retail: Opportunity Ahead?
Working in a city as dynamic as San Francisco, as a businessperson I’ve gotten used to constant change, at least as much as one can. Change is part of our brand here in the Bay Area, after all. And the unique challenges of doing business here keep us on our game.
One of the biggest changes that I’ve seen in recent years has been the transition away from traditional brick-and-mortar retail in favor of online shopping; I’ve written about it here before. This shift continues to have a huge effect, and it’s changing the landscape of commercial real estate.
Last year, Macy’s closed it’s Men’s Store in Union Square, an enormous parcel encompassing over 260,000 square feet. And the retail giant is reportedly planning to liquidate the historic I. Magnin Building next door, part of their flagship space, later this year.
Meanwhile over in the Mid-Market neighborhood, after over two years, the new 6X6 Center (another quarter-million-square-foot space) has managed to attract exactly zero tenants. The historically benighted Mid-Market area surrounding the new mall is still plagued with homelessness and petty crime, and these problems have taken their toll on the high-profile restaurants that followed Twitter, Uber and others into the neighborhood. Sadly, many of those projects have already shuttered.
As much as I disagree with the runaway growth of online shopping and the “Amazon Model,” it’s important to acknowledge these changes won’t be going away anytime soon. And these shifts in the real estate market are likely to have a big impact on the cleaning business. Overbuilt retail spaces may well be converted to residential units–or more importantly for our category, office space.
Commercial vacancies are also something the city needs to be more proactive about. We have ground-floor space standing empty in some of San Francisco’s busiest corridors. Rents stand at an all-time high, and there are landlords who would rather leave their unit empty than take anything but Top Dollar. Instead of serving their communities and leasing the space at a lower, market-friendly rate, they’d rather wait and take the loss as a write-off.
Vacancies are good for no one, and empty storefronts hurt property values, so this strategy is ultimately self-defeating. The incentives–and disincentives–should be reworked so that property is put to its best use. Business is booming in San Francisco, and there is just no reason for the continued blight of empty units.
Business is always about recognizing opportunities wherever they lie, and the troubles of the big retail players are just a reminder of that. And remember: amidst all this shifting ground, our category continues to grow year-over-year. The chaos we see in the retail environment right now only means we are likely to see that growth continue.
San Francisco is a great city, and there’s no doubt we’ve experienced some growing pains. But we’ll figure out our homelessness issues, along with the rest of our problems, in time. In the meanwhile, we need to keep our eye on the ball, and watch for the big opportunities that always come with disruptive change. At C Clean, we say bring it on–and we look forward to the coming year.
We’ll be back with more soon. Remember to shop local, and Happy Indian Summer!