San Francisco’s largest mall is perhaps one step closer to becoming something new after two years in financial limbo as its stores shuttered one by one.
The troubled downtown mall, now called the San Francisco Centre & Emporium, was officially foreclosed upon Wednesday in a public auction on the steps of City Hall. The mostly vacant mall is now owned and operated by the banks that loaned almost $600 million to its former owners, Unibail-Rodamco-Westfield and Brookfield Properties, which walked away from the failing mall back in 2023.
Deutsche Bank and JPMorgan Chase were the only bidders in the auction, which had been delayed at least nine times over the past year as various stakeholders negotiated over the debt. This week, the banks, acting through an affiliate, offered $133 million to formally take control of the property, which they are moving to sell immediately.
The lenders have hired CBRE to market the nine-story indoor shopping center. That could finally open it up to redevelopment. The iconic 1.2 million-square-foot mall equals the size of 21 football fields in the heart of the nation’s tech capital,
“Amid renewed civic leadership, three consecutive years of positive population growth and surging demand from artificial intelligence and technology firms, San Francisco Centre & Emporium is uniquely positioned to anchor the next chapter in downtown San Francisco’s recovery,” said Kyle Kovac, executive vice president of CBRE’s Capital Markets team in San Francisco, in a statement. Kovac and Mike Taquino are leading the sales process along with Kurt Altvater and Kati Thabit.
San Francisco is starting to sparkle again with the onslaught of AI startups and workers returning to the city center after several years of economic doldrums.
Downward spiral
Like other malls built in an era before e-commerce, San Francisco Centre had been struggling for years before the pandemic. The retail property in the heart of the city’s commercial district was dealt a blow in 2023 when Nordstrom, its anchor tenant of 35 years, closed, and its owners defaulted on the loan on the property. The second anchor tenant, Bloomingdale’s, shut its doors earlier this year.
Since then, the mall has lost its movie theater, its day spa and most of its shops.
Until recently, the basement food court was the mall’s last remaining hive of activity, with online food delivery people buzzing in and out. But after a spate of recent closures, only Shake Shack and Panda Express remain in the dining area.
The mall is currently 9% leased. In 2016, with San Francisco’s tech industry booming and its office vacancy rate in the single digits, the property was valued at $1.2 billion. Then the COVID-19 pandemic hollowed out San Francisco’s downtown core of office workers and retailers. The most recent appraisal this past July showed the value had dipped to $260 million.
In recent months, downtown San Francisco has been staging a comeback. Mayor Daniel Lurie and upbeat brokers point to a handful of openings that have pushed the vacancy rate of the city’s central shopping district down to 14.7%.
“Both retailer and investor interest in the neighborhood is very strong right now,” said veteran Union Square broker Julie Taylor of Colliers. “You can see it and feel it on the streets.”
Better days?
Even the most enthusiastic cheerleaders for the city’s comeback admit that downtown San Francisco won’t truly be back until the question of the blighted mall’s future is addressed.
“Every time people talk about downtown San Francisco, the mall comes up,” Sujata Srivastava, chief policy officer at the Bay Area nonprofit SPUR, recently told CoStar News.
Officials and others have reimagined the property as an apartment complex, a soccer stadium and a college campus. CBRE said in a press release that the listing “represents a rare opportunity to reposition or redevelop one of the most significant urban properties in the United States.” The real estate firm added that “investors and developers can transform the existing structure or pursue a new mixed-use vision within the existing 400-foot height limit.”
The mall opened back in 1988, a celebrated example of an urban vertical mall, sporting the nation’s first spiral escalators with gleaming brass banisters that whisked shoppers upward to a luxury spa, a Champagne and caviar bar or a mirrored room where they could blend custom fragrances.