SAN FRANCISCO - Westfield Centre on Monday says they are transferring management of the San Francisco shopping mall to its lender, who will then appoint a receiver to operate the property.
What does this mean? The company, Unibail-Rodamco-Westfield (URW) says it was a difficult decision, but that "challenging operating conditions" in the city's downtown have led to a decline in sales, occupancy and in foot traffic.
Indeed, as the company shares its first quarter trading update, they explain a significant decrease in sales. In 2019, they reported $455 million year-to-date, but by December 2022, those sales figures had dropped to $298 million. In that same period, San Jose's Westfield Valley Fair, also in the company's portfolio, had reported a 66% increase in sales. The company said overall U.S. flagship sales have increased.
The mall owner said it has successfully operated on Market Street between 5th and 4th streets for more than 20 years.
They also had more specifics on the drop in foot traffic. "Since 2019, foot traffic has decreased to 5.6 million visits (Dec 2022 YTD) from 9.7 million, a 43% drop at a time when our US Flagship portfolio has seen a 98% recovery," Westfield's statement read.
According to the Chronicle, the company has stopped making payments on its $558 million loan.
The downtown and Union Square vacancies have been well-documented and seem to keep on coming. As recently as last week, we saw a similar situation where the investment firm backing the Parc 55 and Hilton San Francisco Union Square hotels stopped making payments on their $725 million loan. The future of two of the city's largest hotels is uncertain, but operators and city officials have said the hotels are running and open for business.
We've also seen rampant retail vacancies, or the announcements thereof, along Market Street, Union Square, and in downtown San Francisco. We've recently seen announcements from Coco Republic, Old Navy, Nordstrom, Saks Off Fifth and Anthropologie, and Banana Republic all announcing they are closing their stores. Even Whole Foods fled the troubled Mid-Market corridor where its brand-new flagship San Francisco store now stands empty. They cited employee safety concerns as the reason for what they call a temporary closure.
But these closures have much in common in their reasons as to why they are leaving.
Mayor London Breed issued a statement reacting to the news of the Westfield. She touched on some of those common threads. "The public safety resources we've dedicated to the area, including ambassadors and police officers remain in place. The stores are still part of our Downtown experience and we will continue to support this area to make it clean, safe, and inviting for everyone," Breed's statement read in part.
But the news of this development does not seem to take the mayor by surprise.
"This has been 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," Breed wrote.
Last year, Westfield's parent company said they were planning to sell their 24 malls in the United States to focus on their European properties.
The mayor touches on the changing landscape of not only retail, but how that could intersect with downtown suffering retail vacancies. Westfield alone said the mall's occupancy level has dropped drastically to 55%. Their national occupancy rate averages around 93%.
Breed looked forward to 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," Breed's statement read.