Luxury fashion retail is not dead

Is luxury retail dying in San Francisco’s Union Square neighborhood? Over the past four years, the district known for its famous retail activity has seen more than 30 stores close their doors. Before the summer, real estate firm Cushman & Wakefield published a report on the city’s retail market, which concluded that Union Square hit a new peak vacancy rate in the first quarter of 2024, at 20.6%. A situation that experts generally explain as the result of rising taxes, the general decline of retail in the face of competition from online shopping, and the acceleration of the crime rate in this part of San Francisco.

Last spring, the announcement that Macy's department store would close by 2025 was another disappointment. It coincided with a global plan to close 150 stores by 2026. With 700,000 square feet of space closing, about 34.5% of Union Square could soon become vacant.

While no name has yet been announced to take over the Macy's building, San Francisco Mayor London Breed recently stated that “the city will continue to work closely with Macy's and any potential new owners to ensure that this iconic landmark continues to serve San Francisco for decades to come.” Breed said that “there is tremendous opportunity at this site, and I know that this city will continue to attract new investment and ideas.”

Nearby, on Market Street, things don’t look much better. Following the closures of Anthropologie, Saks Off 5th, and the Nordstrom department store last summer, L’Occitane closed its store on the first floor of the Emporium Centre four months ago, ending more than two decades at 865 Market Street. In return, an Ikea store opened in August 2023, revitalizing a neglected part of Market Street. The same sad fact applies to Post Street, another of Union Square’s iconic arteries, where TheRealReal, the famous secondhand luxury fashion store, closed its doors last year, followed last May by the Shreve & Co. jewelry store, leaving a 15,000-square-foot space vacant.

Maiden Lane, a 19th-century brothel turned temple of luxury in Union Square and a pedestrian mall stretching two blocks between Kearny and Stockton streets, is now almost entirely devoid of shops. A ghost town, say some locals, hit particularly hard by COVID. With Jimmy Choo, Marc Jacobs, Crate & Barrel and Alexander McQueen stores closed, only a few trendy addresses remain, such as Martin Margiela and the Isaia boutique designed by architect Frank Lloyd Wright.

In this dying environment, it’s not all bad news. Many of the major players in the luxury goods industry are still in Union Square, and expansion projects are popping up all around. Louis Vuitton and Hermès continue to watch over Union Square on Geary St and Grant St. Italian luxury house Bottega Veneta expanded in 2023, closing its entrance on Maiden Lane and creating a monumental entrance on Geary Street. Yves Saint Laurent has occupied 3 floors on Grant Avenue since 2022. Acne Studios is celebrating its 7th anniversary next door, and Brunello Cucinelli has even doubled its space in recent years.

Another incentive in the luxury market is the remarkable recovery of the watch industry with the opening of the Patek Philippe boutique in 2023 on Post Street, followed last March by the German luxury watch chain A. Lange & Söhne. In June, the Swiss brand Breitling opened its 29th boutique in the United States. Together with Rolex, they form a new international destination in the fine watchmaking market.

In the coming months, Chanel will embark on other luxury projects, including the purchase of the William Sonoma kitchenware boutique at 340 Post Street. The sale, valued at $63 million, will allow Chanel to occupy a three-story building by 2025.

Taking advantage of the available space, Italian luxury brand Bulgari also announced last April that it had signed a new lease with developer Gosvernor for a 9,000-square-foot multi-level space at its downtown property. “This latest lease transaction underscores the continued evolution and importance of Union Square in the luxury retail landscape,” said Marisa Rodriguez, executive director of Union Square Alliance, a Union Square business improvement district. “This move, coupled with recent news of Chanel’s expansion and the entry of prestigious watch brands such as Patek Philippe and Breitling, signifies a trend of confidence and growth in the area.”

Despite its positive outlook, other iconic Union Square addresses are still at risk of closing, including the iconic Gump's, the American luxury furniture and home decor retailer established in San Francisco since 1861. Owner John Chachas announced last year that the department store was considering closing, stating that “San Francisco has become unlivable for its residents, unsafe for our employees, and hostile to visitors from around the world.”

If the luxury market is not dead in Union Square, many buildings will have to convert part of their floors into apartments in the coming years. Just before the summer, the San Francisco City Council also proposed turning Powell Street into the city's main shopping and hotel destination, and promised to improve Maiden Lane.

San Francisco, which remains the second richest city in the United States, is also seeing the development of other luxury retail niches. On Sacramento Street, the elegant shopping street in the Presidio Heights neighborhood, Sherri McMullen has just opened her second multi-brand store, after the first in Oakland. On the same sidewalk are two other quality multi-brand stores, such as Betty Lin and the iconic Susan. New York designer Rachel Comey recently chose the Fillmore District to present her collections to the many women and mothers in the neighborhood.

Finally, Palo Alto, in the heart of Silicon Valley, confirms its excellent state of health in the luxury retail sector. Considered one of the richest cities in the United States, with an average family income of close to 190,000 dollars, the city has several luxury shopping centres, including the Stanford Shopping Center, which today houses the best fashion and home decoration brands.