Why Retail Is Coming Back Faster Than Office Leasing in San Francisco
Sep 2, 2022
San Francisco’s downtown is finally starting to show some life again with more foot traffic and fewer stores boarded up. But the once filled at-capacity commercial office spaces are still empty, leaving businesses hoping workers will come back eventually.
While cities across the country are also struggling to fully recover from the COVID pandemic, San Francisco is far behind as tech companies continue to exit leases and residents move for a more affordable cost of living. Mayor London Breed estimates one-third of San Francisco’s workforce is now remote and living outside of the city.
There are a few key reasons why retail appears to be rebounding faster than we see offices coming back in San Francisco. First, many retailers were able to quickly pivot and adapt to the pandemic by moving ales online to e-commerce and offering safe same-day curbside pickup.
San Francisco’s retail market has always been driven by strong tourism, and we’re starting to see more travelers as restrictions continue to ease up. Lastly, the shift to working from home has created a new class of “retail refugees” as people are looking for convenient places to buy groceries and spend money locally at shops in their own neighborhoods.
This is likely one of the reasons why neighborhood retail has rebounded the fastest, while financial district retail is still struggling due to high office vacancies. The financial district retail is primarily a weekday business. Without the office workers returning to in-person work, there is not enough foot traffic to support our downtown retail.
One thing that has also changed is those offices that once provided employees with food in-house have severely cut back, consequently giving business back to ground floor retailers. This has been a big help to the lunch and coffee spots around San Francisco.
The office market is not expected to fully recover until 2025 at the earliest, while the retail market is expected to continue its rebound in the coming months. This is good news for landlords and retailers alike, as the retail market has been hit the hardest by the pandemic.
San Francisco’s retail market was already under immense pressure long before the pandemic hit when consumers shopping shifted to e-commerce, hurting brick-and-mortar businesses. The pandemic accelerated this trend, which left many retailers closing their doors permanently. However, there are good signs that retail is starting to rebound, as landlords report increased interest from potential tenants.
Overall, the retail market is expected to continue its recovery in the coming months, as travel restrictions ease up and more people visit San Francisco. This is good news for landlords and tenants alike, as a thriving retail sector is critical to the health of the city.
Image via Pexels
Written by: Hans Hansson
Hans Hansson is President of Starboard Commercial Real Estate. Hans has been an active broker for over 35 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email [email protected] or call him at (415) 765-6897. You may also check out his website, https://www.hanshansson.com