Major mall operator Westfield has relinquished control of its San Francisco shopping center to its lenders, joining a growing list of companies exiting the city as it struggles with a rise in crime and high vacancy rates.
Westfield's parent company stopped paying its $558 million outstanding mortgage, the San Francisco Chronicle reported. It will transfer the property's management to a receiver.
The Westfield San Francisco Centre, located in the heart of the city's Union Square retail district, is San Francisco's largest mall. But in recent months it has witnessed an exodus of retail tenants, including its largest, Nordstrom, which plans to leave the property in August. The mall's occupancy currently sits at just 55%, and foot traffic and sales are also falling.
"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 in a statement to CBS Bay Area.
During the three years ending in December 2022, the Westfield mall's sales plummeted to $298 million from $455 million, CBS Bay Area reported. By comparison, retail sales at malls across the U.S. rose 11.2% from 2021 to 2022, according to International Council of Shopping Center data.
San Francisco's economy, like those of many U.S. cities, took a hit during the pandemic. Yet while other cities are regaining their footing, San Francisco continues to struggle, with the city's office vacancies soaring to a record high in the first quarter of 2023, according to a report from commercial real-estate titan CBRE.
Rising crime is also an issue. Burglary reports in San Francisco increased roughly 60% from 2020 to 2021, according to San Francisco Police Department data.
Despite those issues, Westfield's lenders will keep the mall open, San Francisco Mayor London Breed said on Monday.
"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," Breed said in a statement.
Westfield isn't the first major company to pull out of its Bay Area operations.
Earlier this month, Park Hotels & Resorts stopped paying a $725 million loan backed by two of its hotels in San Francisco. The company's CEO Thomas J. Baltimore, Jr. attributed the decision to the city's "clouded" economic recovery and "major challenges."
Some retailers have also abandoned Union Square. Seventeen businesses, including Anthropologie, Gap and Marshall's, have shuttered their Union Square stores, an analysis from The San Francisco Standard shows.
Whole Foods also temporarily shut down one of its flagship stores in April "to ensure the safety" of its staff, blaming a rash of crimes in the area surrounding the store.
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