San Francisco's Retail Scene

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I posted this in a thread about Pershing and Union Squares, but wanted to make sure and include it in this thread as well:

More tourists coming to San Francisco to shop
Stores near Union Square are city's No. 2 attraction

Sarah Duxbury
San Francisco Business Times
March 10, 2006

Union Square is doing its bit to give more people more reasons to shop in San Francisco.

In the past year, a host of new retailers has opened on or around Union Square, expanding the area's retail offerings to appeal to all age groups and budgets.

In September, over 700,000 square feet of new retail and entertainment space will come on line when the expanded Westfield San Francisco Centre opens its doors, amplifying the area's siren song.

At the same time, tourism levels are ticking steadily upward, which sounds a lot like money to Union Square retailers.

"We depend on tourism," said Linda Mjellem, president of the Union Square Association. "The better job the Convention and Visitors Bureau does, the more we benefit."

Union Square is San Francisco's No. 2 attraction after Fisherman's Wharf. According to a 2004 survey of San Francisco hotel guests conducted by the San Francisco Convention and Visitors Bureau, almost 74 percent of hotel guests visit the city's shopping heart.

Its stature among visitors was not always so high. In 1999, the last time data was collected, just 47 percent of hotel guests reported shopping at Union Square, according to Dan Goldes of the SFCVB.

That means more visitors are shopping there now than were five years ago, a fact not lost on Union Square retailers.

Robert Mettler, CEO of Macy's West, has said that more than 10 percent of customers in his Union Square flagship are tourists.

According to a 2005 survey by Westfield San Francisco Centre, just 38 percent of the mall's shoppers live in San Francisco and 33 percent of them come from outside the Bay Area. Furthermore, 16 percent of Westfield's out-of-towners came to San Francisco just to shop.

Erik Nordstrom, executive vice president of full-line stores at Seattle-based Nordstrom, confirmed the prominence of tourist shoppers at his company's flagship in Westfield San Francisco Centre. He said that the firm invests in the store itself as a way to woo and win them.

"A flagship is more than size. It's a high visibility store that defines what a brand is about," Nordstrom said in an October 2005 interview with the Business Times. "We get so many visitors from around the world (in San Francisco); it's a lot of people's introduction to our company, so we have very high standards for it."

The number of tourist shoppers in San Francisco has attracted retailers eager to open flagships. Bloomingdale's will open a 357,000-square-foot flagship at Westfield San Francisco Centre, and Barneys New York is reportedly close to signing a lease to open a flagship store in the old FAO Schwarz building at 48 Stockton St. H&M had its most successful opening day ever in November with its 45,000-square-foot West Coast flagship at 150 Powell St., and Juicy Couture has signed a lease to open a flagship on the corner of Grant and Geary streets.

"What is so unique in San Francisco, compared with a majority of high profile cities, is that you have your local and your tourist and your business and your regional visitor all in one area," said Vikki Johnson of Johnson Hoke, which specializes in retail real estate.

Such a density of offerings is part of San Francisco's famed charm.

New Union Square retailers, and the promise of more to come, have made San Francisco sexier to visitors, to retailers and to locals. Between Westfield and Union Square, more than a dozen new-to-market tenants opened in San Francisco in 2005 or will open in 2006.

Union Square ground floor retail vacancy dropped to 8.6 percent at the end of 2005 from 10.4 percent a year earlier, according to GVA Whitney Cressman.

"Union Square has always been a destination for travelers and shoppers," said Mjellem of the Union Square Association. "With exciting new projects going in -- there's H&M, Zara, Agent Provacateur, which just opened, and Westfield coming online later this year and whatever they're going to do with the Metreon -- there's a really rich mix of stores and places of entertainment to draw people in. This is an exciting, promising time."

Johnson agreed, noting that the Union Square sub-lease market is nearly finished after the lean years following Sept. 11.

"Look at hotel vacancy -- people can't get a hotel room," Johnson said. "New retail that has come into the market has been so successful as far as their reported sales that it bolsters the confidence levels of anyone looking at San Francisco. It says: 'We're back, and we're back in a big way.'"