San Francisco’s retail exodus goes beyond crime, experts say

(SAN FRANCISCO) — The slew of closures of retail stores in San Francisco in recent months doubles as a roundup of well-known shopping brands: Whole Foods, Old Navy and Nordstrom, among others.

Nearly half of the stores in the city’s downtown shopping district have closed since 2019, the San Francisco Standard found in May.

In June, the 70-store downtown Westfield Mall said it would stop making payments on a $558 million loan, relinquishing ownership of the shopping center and leaving the fate of the complex uncertain.

Dubbed a “retail exodus,” the trend has spurred criticism focused on crime and homelessness but a more complicated set of forces is driving companies away from the city, experts and a former downtown store owner told ABC News.

A diminished sense of safety among some shoppers has deterred foot traffic downtown, they said. Additionally, they pointed to sluggish sales at some stores due in part to a longstanding shift away from brick-and-mortar retail that went into overdrive during the pandemic.

The rise of remote work — a trend even more pronounced in the Bay Area’s tech industry — also has slashed the number of office commuters, who previously drove lunchtime business and after-hours shopping downtown, experts said.

“It’s all of the above,” Wade Rose, the president of business advocacy group Advance SF, told ABC News. “These dynamics are bigger than the city.”

Crime, he added, makes up “part of the narrative. It isn’t the full narrative.”

The office of San Francisco Mayor London Breed did not immediately respond to ABC News’ request for comment.

Last month, Breed told Good Morning America that San Francisco faces difficulties but she also faulted a disproportionate focus on exits from the city.

“San Francisco is a major city and it has challenges,” Breed said. “But let’s back up a little bit. You are talking about people who are leaving the city but not the people who are staying, expanding, coming to San Francisco.”

In April, Whole Foods opted to close its flagship location in downtown San Francisco to “ensure worker safety,” the company said in a statement to ABC News at the time, noting that all of the employees would be transferred to nearby locations.

“We have made the difficult decision to close the Trinity store for the time being,” the company said.

Old Navy, which closed its store in downtown San Francisco in May, shared a statement made by its parent company Gap at the time. Old Navy is “always evaluating its real estate portfolio to ensure a healthy fleet of stores that can provide the best possible experience for our customers,” the statement said.

“As a result, we have taken the difficult decision to close our Market Street store when the lease expires, and we are already working to identify new locations in downtown San Francisco that will better serve the needs of the business and our customers,” the statement added.

In May, when Nordstrom announced plans to close stores in downtown San Francisco, the company’s chief stores officer wrote in an email obtained by ABC station KGO in San Francisco that “the dynamics of the downtown San Francisco market have changed dramatically over the past several years, impacting customer foot traffic to our stores and our ability to operate successfully.”

Whole Foods and Nordstrom did not immediately respond to ABC News’ request for additional comment.

Overall, crime statistics suggest mixed results. As of Sunday, the most recent data available, homicides have climbed nearly 8% this year compared to the same period in 2022; and robberies have risen about 12%, San Francisco Police Department data showed. Rapes have fallen almost 24% compared to the same period last year, however, while assaults have dropped nearly 5%, according to the data.

Compared to pre-pandemic performance in 2019, homicides are up 27% over the same period through Sunday; but robberies are down almost 6%, the data showed.

Denise Forbes, who co-founded the boutique California Girl Jewelry, said she noticed a rise in homelessness near the store’s downtown San Francisco location over the years before the pandemic struck.

When the pandemic began, the problems “piled up and up,” she said. The company suffered an 80% drop in revenue in 2020, owing in part to a pandemic-related shutdown that forced a complete shift to e-commerce. In the absence of shoppers near the store, she said she saw drug use and homelessness surge.

The following year, Forbes closed the shop and reopened at a shopping center in nearby Marin County, she said. “It was such a goal to have a business in San Francisco,” she added. “Then it turned out to be such a real disappointment.”

The steep decline of foot traffic downtown during the pandemic heightened a perception of safety risk, which in turn deterred the flow of visitors needed to ease the dismay, said Rose, of Advance SF. That dynamic has persisted amid the sluggish return of in-person office workers, especially in the tech sector, he added.

“​​A massive reduction in foot traffic translates into a significant reduction in sales,” Rose said.

Despite high-profile retail departures, the performance of in-person sales has shown signs of improvement this year, Ted Egan, San Francisco’s chief economist, told ABC News.

Over the first three months of the year, sales tax revenue in San Francisco grew faster than it did statewide in most categories, Egan said. Casual dining receipts in San Francisco were up 23% on a non-inflation adjusted basis over that period compared to 10% statewide, he added; and the city has seen solid growth this year in some types of retail, such as electronics and appliances.

Sales at the downtown shopping neighborhood Union Square were up 7.4% on a non-inflation adjusted basis over the first three months of the year compared to the same period in 2022, he added.

Crime is “a problem” for retailers, Egan said, particularly shoplifting. Over the past four years, San Francisco “suffered a major economic shock during the pandemic and has been slow to recover,” Egan added.

Rose said he envisions a business recovery downtown focused on ensuring safety and reducing apartment rents but also on building parks and other attractions that draw fun-seeking visitors who could replace the lost commuters.

“There’s no silver bullet,” Rose said. “The issue for San Francisco is: What’s next?”

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