San Francisco Union Square is on the road to economic recovery

SAN FRANCISCO (KGO) — For generations, San Francisco’s Union Square has been the retail epicenter of the Bay Area.

The pandemic, changes in shopping habits and working from home have left a large number of storefronts empty. But now there are signs that the area is on the way to recovery.

ABC7 News Building a Better Bay Area Reporter Lyanne Melendez spoke with the person who knows Union Square best about what we can expect. Her name is Kazuko Morgan, Executive Vice President of Cushman and Wakefield.

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Lyanne Melendez: “Your name is everywhere here in Union Square. It must be a heavy burden for you.”

Kazuko Morgan: “It’s not a real burden, but it’s a responsibility to make sure we continue to have the quality and great variety of retailers.”

Melendez: “So where is San Francisco today? Because I see a lot of “for rent” signs.

Morgan: “So Union Square is in a much better place than it was four years ago.”

According to Cushman and Wakefield, the current vacancy rate in Union Square in the first quarter of this year was just over 20 percent. But Morgan told us the spaces are leased or under negotiation, even though the signs haven’t been taken down.

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Melendez: “Why doesn’t it say ‘Just rented’ as ‘Just sold this house’?”

Morgan: “This market tends to be much more underrated. Tenants don’t like to announce until they’re ready. You can’t control the permitting process. There are delays.”

So behind a “for lease” sign, there may already be a tenant waiting to move in.

Case in point, the new Nintendo Store will be housed in a Powell Street location that still has a “for lease” sign.

But note that at its peak in 2016, the vacancy rate around Union Square was just 3%.

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Melendez: “I hear people say, ‘Wow, London is thriving, New York is back and San Francisco, not so much.’ So what will it take?”

Morgan: “I think it’s a combination of things. Number one is the negativity of the media. It’s certainly not what you see today. I can’t tell you how many people come and come and visit. They’re like, ‘San Francisco.’ It’s great what he’s talking about everyone?

Other industries, such as tourism, are expected to eventually bring business back to the location.

Morgan: “The convention business, this year was a down year. But in the coming years, it will also grow, and I think the most important is our office workers.”

Melendez: “But people won’t come back, they told me. Do you work from home?

Morgan: “No, I do not.”

Melendez: “Not at my place either. So how do we change this mindset?”

Morgan: “I think it comes from the top down.”

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But even some city workers are still working from home several days a week, despite Mayor London Breed’s insistence that they return in person five days ago.

To get perspective on the office real estate market, we reached out to Mark McGranahan of Avison Young, a large commercial real estate agency in San Francisco.

“We’re four days a week. I agree with you that the city needs to lead by example, and we’re having that conversation with a lot of our big companies that we represent here,” McGranahan said.

He firmly believes that downtown residential housing will help turn things around.

“We need more residential housing in downtown San Francisco. I just came back from New York, Chicago, and there’s a lot more housing, which then creates more retail, which then creates more activity and makes people more confident and comfortable being here.” McGranahan said. “So if we have conventions, we have visitors and more housing, that’s just going to create the right material to spark those small businesses.”