Westfield begins withdrawal from San Francisco Centre, adding to ongoing business exodus from city
SAN FRANCISCO -- Westfield is surrendering control of its namesake shopping center in the heart of downtown San Francisco to its lender adding to the exodus of major companies and retailers leaving the city.
The Westfield San Francisco Centre at Market and Fifth Streets is the city's largest shopping mall. Last month, the mall's largest tenant, Nordstrom, announced it and an adjacent Nordstrom Rack store would be leaving the location in August, citing the dramatic changes to "the dynamics of the downtown San Francisco market."
UPDATE: Cinemark shutting down theater in Westfield San Francisco Centre
The San Francisco Chronicle reported Westfield's parent company has stopped making payments on a $558 million loan on the property and its partner, Brookfield Properties, started transferring control of the mall this month.
"For more than 20 years, Westfield has proudly and successfully operated San Francisco Centre, investing significantly over that time in the vitality of the property," Westfield said in a statement. "Given the challenging operating conditions in downtown San Francisco, which have led to declines in sales, occupancy and foot traffic, we have made the difficult decision to begin the process to transfer management of the shopping center to our lender to allow them to appoint a receiver to operate the property going forward."
Westfield said it has seen a significant decrease in total sales at San Francisco Centre from $455 million in 2019 to $298 million in Dec 2022 year-to-date. During the same period, the Westfield Valley Fair mall in neighboring San Jose experienced a showed a 66% increase in sales. Overall, Westfield stores in California increased sales by 26% and by 23% nationally, the company said.
The mall's occupancy level has dropped to about 55%, which includes the already-announced closures of tenants such as Nordstrom, Banana Republic and others, the company said, while the rest of its U.S. occupancy averages around 93%.
Westfield's parent company, French commercial real estate company Unibail-Rodamco-Westfield, announced plans last year to sell off two dozen of its U.S. malls, including the San Francisco Centre, to focus exclusively on the company's European properties.
In a prepared statement, San Francisco Mayor London Breed said Westfield's exit from the San Francisco Centre was "something that has been coming for some time."
"We've had numerous conversations with Westfield about the future of this site, and it's been clear that they did not have a long-term commitment to San Francisco as they look to withdraw entirely from the United States market," said Breed. "With new management, we will have an opportunity to pursue a new vision for this space that focuses on what the future of Downtown San Francisco can be. Whether that's attracting new types of business or educational institutions, or creating a totally different experience, we need to be open to what's possible. Retail is changing, and we will adapt to diversify and better use spaces in our Downtown area. This is at the heart of what we are trying to create in San Francisco as we move forward."
Breed said the remaining stores at the mall would remain open under the new management.
Marisa Rodriguez, CEO of SF business group Union Square Alliance, also said that while the news of the San Francisco Centre going into receivership was not unexpected, it also provides new opportunities for the property.
"New ownership will provide an opening for this iconic space to bring in new energy and new innovative programming to meet new audiences as the area continues to adapt Post-pandemic," said Rodriguez. These opportunities are clearly not possible under the current situation. Also, it is important to note that at the moment, this news represents no loss of jobs nor closing of individual tenants."
Earlier this month, the investment firm that owns Hilton San Francisco Union Square and Parc 55 hotels said it had ceased payments on a $725 million loan as looks to reduce its presence in the city. Park Hotels and Resorts CEO Thomas Baltimore, Jr., said that San Francisco's "path to recovery remains clouded and elongated by major challenges" including office vacancies caused by companies letting employees work-from-home, a "weaker than expected citywide convention calendar" through 2027 and "concerns over street conditions."
Retail and hospitality have been hit hard in downtown San Francisco which has seen a wave of businesses leaving the area. San Francisco Standard has tracked at least 20 closures of major stores since 2020.
When Nordstrom announced it was leaving the Wesfield Center last month, Unibail-Rodamco-Westfield said it had urged city leaders for many years to find solutions to the"deteriorating situation" and "rampant criminal activity" in the area.
"The current environment is not sustainable for the community, or businesses, and we are hopeful the City will implement the changes that are so urgently needed," it said.
