Is San Francisco’s retail scene dead? Not so fast

To receive the Vogue Business newsletter, sign up here. Searching for a location for her fourth store, designer Rachel Comey checked out cities including Austin, Seattle and Chicago, before landing on San Francisco. She’s leased a space in a wealthy enclave, which will open in early November. Yes, the New York designer, who founded her business in 2001, is opening a store in San Francisco, arguably the most maligned retail city in America. A nasty cocktail of rampant crime, drugs and work-from-home flight has led the likes of Nordstrom, Nordstrom Rack, Alexander McQueen, Arc’teryx, Anthropologie, Saks Off 5th and Banana Republic to close stores in the city. National headlines have spoken of the city’s retail doom and gloom. Comey has a rather different take. “I just instinctively felt it would be a great place for us,” she says. She hired interior designer Charles de Lisle, who had previously designed her stores on Crosby Street in New York and Melrose Place in Los Angeles. His touches at the 1,800-square-foot Fillmore Street store in Pacific Heights include a silver foil wall. She chooses her words with care. “I don’t want to sound overconfident here,” she continues. “I feel like we’re making the right decision.” By many measures, Comey could not be coming to San Francisco at a worse time. The citywide retail vacancy rate leapt to 6.6 per cent in the third quarter of 2023, up from 6 per cent the previous quarter, part of a steady increase over the past few years, according to commercial real estate company Cushman & Wakefield. Westfield turned its San Francisco Centre mall over to lenders after Nordstrom’s departure left the property only 55 per cent occupied. Office workers have abandoned San Francisco in droves. Vacancies in the third quarter were 31 per cent. Among the offices that remain inhabited, a majority of workers are working remotely — and taking their shopping someplace else as well. According to Kastle Access Control Systems, which tracks key card entries, only 43.5 per cent of San Francisco offices had people working in them at the end of September. The good news: that’s up from 20.8 per cent at the beginning of the year. Reports of smash-and-grab crimes and heroin deaths in gutters have populated national news stories, chronicling what appears to be a retail hell-zone. The New York Post reported in June that only 107 retailers were left in and around San Francisco’s chic Union Square in May, out of 203 before Covid. A recent headline in the New Yorker asked, “What happened to San Francisco, really?” San Francisco’s retail: The pain is focused Yet, Comey is not the only luxury retail business to select San Francisco for its next berth. The five-year-old Chicago multi-brand store Svrn (pronounced “Sovereign”) will open its second outpost in San Francisco next March, stocking labels including The Row, Dries Van Noten, Lemaire, Rick Owens, Jacquemus and Jil Sander. It turns out that San Francisco’s retail pain is largely focused on a few downtown areas, including the Union Square district that has traditionally been a luxury hub for the city, with brands from Louis Vuitton to Bottega Veneta. Downtown San Francisco, with its office buildings, hotels and large-footprint stores, has suffered due to its proximity to the dicey Tenderloin district and because of the departures of office workers. New fashion purveyors, however, see potential in wealthy neighbourhoods where residents shop close to home rather than near the office. It’s part of a larger trend towards luxury stores locating near where their clients live and take their children to school. “What you see on the news is a very segmented portion of the city,” says Adam Pirtle, Svrn’s chief operating officer. “The Tenderloin? It’s very sad. Does it carry over to Union Square? Yes.” Pamela Mendelsohn, a commercial real estate broker in San Francisco who placed Thom Browne in the city’s Jackson Square neighbourhood, worked with Comey and Svrn. “Our rents have not dropped in neighbourhoods. They have dropped downtown,” she says. She notes that Chanel recently bought a building that formerly housed a Williams Sonoma store, but significantly, she says that retailers are “taking smaller footprints. They aren’t interested in big stores.” There are some exceptions. Banana Republic, after closing its downtown store, opened a two storey, 3,500-square-foot flagship in Union Square. Svrn leased a 2,500-square-foot-store on Fillmore in lower Pacific Heights, not far from Rachel Comey’s location. “In Pacific Heights, you have a bustling neighbourhood where people are out and about enjoying the neighbourhood,” Pirtle says. The San Francisco Svrn will carry only menswear, unlike the Chicago store that also carries womenswear, because Pirtle sees a “hole in the market” for fashion-focused menswear in San Francisco. The energy vibes: Still there From eyeballing their e-commerce sales, Comey and Pirtle both say they know they have customers in San Francisco. In her search for locations, Comey visited the city’s central business district where Nordstrom and other stores have closed. The store footprints felt far too large for her label, and the business area lacked the warmth of community. “It seems to be going through some kind of transition,” she says. “But, when I visited all over San Francisco, I just got really great energy vibes. It’s so beautiful. They’re thriving.” It took Comey six months to find the storefront on Fillmore Street. She discovered there is so little available space in the neighbourhood that she was unable to negotiate terms. She was beaten out by an antique store for her top choice, and settled for her second choice — a quaint one-storey shop across the street. Originally a bank, it had lately been an Intermix store, and still had Intermix mannequins, trash and even someone’s eyeglasses laying around. Less than thrilled with that refuse, Comey nonetheless signed a five-year lease with a five-year extension. “You’ve really got to do your own research,” the entrepreneurial designer says. “I feel like we’re just going with our gut reaction.” Comments, questions or feedback? Email us at feedback@voguebusiness.com. More from this author: The US wholesale model is hurting everyone Can New York Fashion Week bridge its global reputation gap? Behind a new Barneys collab, Forever 21 is quietly reinventing itself

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