07/23/2023 – 12:40
Jack Mogannam, manager of Sam’s Cable Car Lounge in downtown San Francisco, Calif., fondly remembers the days when his bar stayed open until the wee hours of the night, welcoming crowds who jostled the streets, bar hopped from bar to bar, window shopped or just breathed in the night air.
He had to drastically reduce his opening hours because of decreased foot traffic, and business dropped by 30%. A sign outside the bar implores: “We need your support!”
“I’d stand in front of the bar at 10 pm and, look, it was like a street party,” said Mogannam. “Now you see, like, six people around the block. It’s a ghost town.”
After a three-year exile, with the pandemic now fading from view, the crowds and electric ambience of the city center have not returned.
Empty storefronts dot the streets. Large “We’re Closing” banners are hung from the windows. The Uniqlo, Nordstrom Rack, and Anthropologie brand stores are gone. Last month, the owner of Westfield San Francisco Centre, a mall with more than 20 years of history, said he was returning the property to creditors, citing slumping sales and foot traffic. The owner of two stately hotels, including a Hilton, did the same.
Shampoo, toothpaste and other hygiene products are locked in pharmacies in the city centre. And armed thieves recently broke into a Gucci store in broad daylight.
Downtown San Francisco has become the prime example of what inner cities shouldn’t be: empty, crime-ridden, and decaying in more ways than one. But in fact, it’s just one of many cities across the United States whose centers are grappling with a post-pandemic warning: diversify or die.
As the pandemic took hold in early 2020, it pushed people out of city centers and increased the flow into stores and restaurants in residential neighborhoods and nearby suburbs as workers moved closer to home. These habits seem to be here to stay.
Now that they are no longer dominated by office workers, downtown areas must become destinations for people to gather throughout the day, says Richard Florida, an urban planning expert at the University of Toronto.
“It’s not central business districts anymore. They are centers of innovation, entertainment, leisure,” she says. “The sooner cities realize this, the better.”
The data confirms that downtown San Francisco is having a tougher time than most. A study of 63 North American urban centers by the University of Toronto ranked the city last in the ranking for returning to pre-pandemic activities, getting just 32% of its 2019 traffic.
Hotel revenue is flat at 73% from pre-pandemic levels, weekly office attendance remains below 50% and metro trips to the city center are at 33%, according to a recent city economic report.
24.8% of offices in San Francisco were empty in the first quarter, more than five times higher than pre-pandemic levels and well above the average rate of 18.5% for the nation’s top 10 cities, according to CBRE, a commercial real estate services company.
Why? San Francisco relied heavily on international tourism and its technology workforce, which disappeared during the pandemic.
But other big cities like Portland and Seattle that also rely on tech workers are facing similar declines, according to the Center City Recovery Study, which used anonymized cell phone data to analyze downtown activity patterns before the pandemic and between March and May of this year.
In Chicago, which ranked 45th in the study, major retailers like AT&T, Old Navy and Banana Republic on the Magnificent Mile, the city’s largest shopping district, have closed or will close soon as visitor traffic has not recovered.
And cities in the Midwest like Indianapolis and Cleveland struggled with shrinking centers even before the pandemic, as they relied on a single industry to sustain them and lacked booming industries like technology, said Karen Chapple, director of the University of Toronto’s School of Cities and author of the study.
San Francisco officials are taking the demise of downtown seriously. Supervisors recently expanded downtown zoning rules to allow for mixed-use spaces: offices and services on the upper floors and entertainment and temporary retail on the ground floor. The legislation also cuts red tape to facilitate the conversion of existing offices into homes.
The city’s mayor, London Breed, recently announced a $6 million investment in upgrading a three-block stretch of a popular streetcar line to improve commuting capacity and attract new business.
But Marc Benioff, chief executive of Salesforce, the city’s biggest employer and prime tenant in its tallest skyscraper, said downtown “will never go back to the way it was” when it comes to workers commuting every day. He advised Breed to convert offices into residences and hire more police to give visitors a sense of security.
“We need to rebalance downtown,” says Benioff.
Downtown homes have been the key to success in Baltimore and Salt Lake City, according to Chapple.
Real estate experts also point to office-to-home conversions as a potential lifeboat. Cities like New York and Pittsburgh are offering substantial tax breaks for contractors to do this type of conversion.
However, for many cities, including San Francisco, it will take more than housing for downtowns to flourish.
Daud Shuja, owner and designer of Franco Uomo, an upscale clothing store based in San Jose, Calif., said new customers living in San Francisco drive at least an hour to get to the store. He has plans to open a store in a more convenient location in suburban Palo Alto next year.
“They just don’t want to deal with the homeless, the weather, the environment,” he said.
Still, San Francisco officials say the downtown area, which stretches from City Hall to the Embarcadero waterfront and encompasses the financial district and parts of the South of Market neighborhood, is in transition.
The Gap, which opened in San Francisco in 1969, closed its flagship Gap and Old Navy stores near Union Square. But the company is not completely abandoning the city, and plans to open four new stores for its major brands at its headquarters, close to the waterfront, in addition to already foreseeing other new stores.
Marisa Rodriguez, CEO of the Union Square Alliance, said foot traffic is on the rise and an intense tourist season is expected. Sales tax revenue from upscale and casual restaurants, as well as hotels and motels, has also risen, said Ted Egan, the city’s chief economist, countering the narrative that San Francisco is doomed to ruin.
In addition, Union Square’s new businesses include upscale fusion restaurants, a hot yoga studio hosted by actress Jessica Alba and a rare sneaker shop. The region just needs to overcome hesitation from local visitors and other parts of the country caused by negative news releases, Rodriguez said.
“When you’re planning a trip and you’re like, ‘I’ve always wanted to go to San Francisco, but I keep reading about this stuff.’ In fact, the city is beautiful. It’s here to welcome you,” she says. “I just hope that noise goes away soon.”
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