Diversify or die: San Francisco’s downtown is a wake-up call for other cities

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SAN FRANCISCO (AP) — Jack Mugannam, manager of Sam’s Cable Car Lounge in downtown San Francisco, is relishing the days when his bar stayed open after midnight every night, welcoming the crowds that crowded the streets, bar-hopped, or window-shopped or just entered. night air.

He’s had to cut those hours significantly because of less foot traffic, and work is down 30%. A sign outside the arena reads: “We need your support!”

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“I’d stand outside my pub at 10pm and look, it’s going to be like a party in the street,” Mugannam said. “Now you see, like, six people on the street up and down the block. It’s a ghost town.”

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After three years of exile, the epidemic has now faded from view, and the expected crowds and electric atmosphere of the city center are no longer there.

Empty storefronts dot the streets. Large “GET OUT OF WORK” signs hung in the windows. Uniqlo Gold, Nordstrom Rack and Anthropologie. Last month, the owner of the Westfield San Francisco mall, a stable for more than 20 years, said he was returning the mall to the lender, citing declining sales and foot traffic. The owner of two high-rise hotels, including the Hilton, did the same.

Shampoo, toothpaste, and other toiletries are closed at downtown pharmacies. Armed robbers recently struck a Gucci store in broad daylight.

San Francisco has become the prime example of what downtown should not look like: vacant, crime-ridden, and in various stages of decay. But really, it’s just one of many cities across the US whose downtown is dealing with a post-pandemic wake-up call: diversify or die.

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As the pandemic hit in early 2020, it prompted people to leave city centers and boosted shopping and dining in residential neighborhoods and nearby suburbs as workers stayed close to home. These habits seem poised to stay.

It’s no longer the business of office workers, said Richard Florida, a city planning specialist at the University of Toronto, but rather that downtown should become round-the-clock destinations for people to congregate.

They are no longer central business districts. “They are centers of innovation, entertainment and recreation,” he said. “The sooner places realize this, the better.”

The data shows that downtown San Francisco is having a tougher time than most. A study of 63 North American cities by the University of Toronto ranked Dead City last in returning to pre-pandemic activity, with just 32% of 2019’s traffic.

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Hotel revenue is stuck at 73% of pre-pandemic levels, weekly office attendance remains below 50%, and commuter rail travel to the city center is at 33%, according to a recent economic report from the city.

San Francisco’s job vacancy rate was 24.8% in the first quarter, five times higher than pre-pandemic levels and well above the average rate of 18.5% for the nation’s 10 largest cities, according to CBRE, a commercial real estate services firm. .

Why? San Francisco relied heavily on international tourism and its tech workforce, both of which have disappeared during the pandemic.

But other major cities, including Portland and Seattle, which also rely on tech workers, are grappling with similar declines, according to the Downtown Recovery Study, which used anonymized mobile phone data to analyze activity patterns in downtown before the pandemic and between March and May. from May. this year.

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In Chicago, which ranked 45th in the study, major retailers like AT&T, Old Navy and Banana Republic in the Magnificent Mile closed or soon because visitor traffic has not rebounded.

“Midwestern cities like Indianapolis and Cleveland really struggled pre-pandemic with dwindling downtown areas because they depend on a single industry to support them and lack thriving industries like technology,” said Karen Chapple, director of the School of Cities at the University of Toronto and author of The New York Times. . the study.

San Francisco’s leaders are taking downtown’s demise very seriously. Supervisors recently relaxed downtown zoning rules to allow for mixed-use spaces: offices and services on the upper floors and entertainment and pop-up shops on the ground floor. Legislation also reduces bureaucracy to facilitate conversion of existing office space into housing.

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Mayor London Breed recently announced $6 million to upgrade a three-block stretch of a popular cable car transformation to improve walkability and attract business.

But Marc Benioff, CEO of Salesforce, the city’s largest employer and anchor tenant of its tallest skyscraper, said downtown will “never go back to the way it was” when it comes to workers who commute every day. Breed advised converting office spaces into residences and hiring more police to give visitors a sense of security.

“We need to rebalance downtown,” Benioff said.

Chapple said that downtown housing was the key to success in Baltimore and Salt Lake City.

Real estate experts also point to office-to-office transfers as a potential lifeline. Cities like New York and Pittsburgh offer significant tax breaks to developers to incentivize such conversions.

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But for many cities, including San Francisco, it will take more than just housing for downtown to thrive.

New customers who live in San Francisco drive at least an hour to the store, said Daoud Shuja, owner and designer of Franco Uomo, a luxury clothing store based in San Jose. He plans to open a shop in a more convenient location in the Palo Alto suburbs next year.

“They don’t want to deal with homelessness, the environment, the atmosphere,” he said.

However, San Francisco officials say downtown, which stretches from City Hall to the Embarcadero Waterfront and includes the Financial District and parts of the South of Market district, is in transition.

Gap began in San Francisco in 1969, closing its flagship Gap and Old Navy stores near Union Square. But the company isn’t abandoning the city entirely, planning four new stores of its major brands at its headquarters near the waterfront and anticipating other new ones.

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Foot traffic continues to rise and there is expected to be a strong tourist season,” said Marisa Rodriguez, CEO of the Union Square Alliance. Sales tax revenue from fine and casual dining, as well as hotels and motels, are also up, said Ted Egan, the city’s chief economist, challenging the narrative that San Francisco is in a death loop.

Moreover, new businesses in Union Square include high-end restaurants, a hot yoga studio favored by celebrity Jessica Alba and a rare sneaker store. Rodriguez said the area just has to get over the reluctance of local and national visitors because of the negative press.

When you make your travel plans, and you’re like, ‘I’ve always wanted to go to San Francisco, but I keep reading all this stuff. When in fact she is beautiful. “She is here to welcome you,” she said. “I just hope the noise subsides quickly.”

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D’Innocenzio reported from New York. Associated Press writer Michael Liedtke contributed to this report.

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