May 5, 2023 - News

Downtown San Francisco continues to struggle as more businesses leave

Mobile device activity in select downtown areas compared to pre-pandemic levels
Data: University of Toronto; Chart: Axios Visuals

San Francisco's downtown is still struggling to recover from the pandemic as the impending closure of retail behemoth Nordstrom looms.

What's happening: Downtown activity is just 32% of what it was before the pandemic.

  • That's according to anonymized mobile device connectivity data analyzed by researchers at the University of Toronto's School of Cities.

Why it matters: Downtown San Francisco became a ghost town during the height of the COVID-19 pandemic as people stayed home.

  • Even as the pandemic ebbs, the era of remote and hybrid work it ushered in means fewer people visiting restaurants, bars and shops.
  • That has big implications for downtown economies, which have historically relied on commuting workers who spend money before, during and after their daily 9-5s.

Zoom in: San Francisco's sluggish recovery is due at least in part to its heavy concentration of tech workers — many of whom decamped elsewhere amid the pandemic — as well as a shortage of affordable housing.

  • Downtown is also facing a retail exodus, with the departures or planned departures of stores like Nordstrom, Uniqlo, Gap, Saks Off 5th, H&M and more.

What they're saying: "Nordstrom leaving is very disheartening and shows the need for fast-tracked legislation to help retail and immediately focus on zoning that meets the critical needs of a time when the entire retail landscape has changed nationwide," said Marisa Rodriguez, CEO of the Union Square Alliance.

Between the lines: Some city leaders have pointed to crime as a driver behind the retail exodus downtown, the San Francisco Chronicle reports.

  • Last week, a Walgreens security guard was arrested on suspicion of fatally shooting a 24-year-old who police said shoplifted.

Zoom out: Downtown activity has returned to — or even exceeded — pre-pandemic rates in a handful of U.S. cities, but most are still struggling to attract the foot traffic they once did.

  • Salt Lake City (139%); Bakersfield, California (118%) and Fresno, California (115%) had among the country's highest post-pandemic downtown recovery rates as of February (the most recent data available), as measured by estimated foot traffic.
  • Joining San Francisco at the bottom are St. Louis (38%) and Portland, Oregon (40%).

How it works: The researchers essentially treated smartphones and other mobile devices as a proxy for their owners — if a device pings a nearby cell tower, it's a good bet that's where the device's owner is.

Reality check: While downtown activity is one indicator of a city's economic health, it doesn't paint a full picture on its own.

  • The lure of better, springtime weather, meanwhile, might convince more people to head back into the city — to enjoy dinner and drinks al fresco, for instance.

What's next: San Francisco is experimenting with various efforts to rethink its downtown neighborhoods — including, most notably, office-to-residential building conversions, which are poised to skyrocket in the coming years.

  • Yet that idea is more cumbersome than it might seem, in part because the design and shape of some office buildings make them ill-suited for residential use.
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