Brian and Hailey Politron opened a luxury sneaker reseller called Nectar Supply on the third floor of the Westfield San Francisco Centre in 2022 after a successful holiday pop-up convinced the then-23-year-olds they were ready for a long-term investment.
As opposed to their mall neighbors Foot Locker and Shoe Palace, which primarily carry the latest styles and makes, Nectar stocks as many rare vintage Nike Dunks, Air Jordans and Yeezys as it can source.
In their first full year of business, the Politrons brought in around $2 million in sales, more than enough to cover operating expenses plus the $16,000 monthly lease they signed with the then-owners of the mall, Unibail-Rodamco-Westfield, at the beginning of that year.
“That first year was so great,” Hailey Politron said. “Our sales in San Francisco motivated us to keep building our empire.” In April 2023, the couple used that momentum to branch out, opening up a second store at Westfield Galleria at Roseville, near Sacramento.
Then—seemingly overnight—the rug was pulled out from under them.
A month after their second location’s grand opening, the San Francisco mall’s most prominent anchor tenant, Nordstrom, announced it would close its doors in August, leaving more than 300,000 square feet vacant across five floors. Shortly thereafter, the mall’s owners, Westfield and Brookfield Properties, said they were handing the property back to lenders after the companies ostensibly found it no longer worth investing in.
Now, stripped of the Westfield name and the brand’s distinctive red lettering, the 1.5-million-square-foot San Francisco Centre has become synonymous with the challenges of Downtown San Francisco: a hollowed-out business district, vacancy rates hovering at historic highs, widespread public safety concerns and business owners like the Politrons trying to find a way to survive despite what appears to be increasingly insurmountable odds.
“Once Nordstrom closed, the mall became like a ghost town,” Brian Politron said from behind the register, looking out at the bright white walls of shoes at Nectar. With fewer and fewer customers coming, the couple sometimes pass the time by creating silly social media videos about their business making light of the situation and perhaps enjoying a bit of catharsis for themselves.
Last year was nothing short of a financial disaster for Nectar, Brian Politron said. The monthly rent payments have remained the same. Sales at the San Francisco store, on the other hand, plummeted by more than 55% in 2023.
“It doesn’t make any sense to pay rent near that amount,” Brian Politron said. “It’s the last thing we want to do since it all started at this mall, … but if things don’t change soon, we’re going to have to close.”
A Generational Change
For the Politrons and other remaining tenants at the San Francisco Centre, the constant drumbeat of store closures—with at least five shops shuttering since the new year alone—looms over them like a dark cloud. The mall is currently more than 50% vacant.
On their way out the door, companies like Nordstrom and Whole Foods have cited deteriorating street conditions and security concerns for their decision to close up shop Downtown. Other observers point to the rise of online shopping as the primary culprit for why places like San Francisco Centre mall and its big-box counterparts are becoming obsolete. Meanwhile, every person involved in commercial real estate agrees that the flight of office workers from urban cores broke the dam.
While those narratives offer a convenient explanation for a recent epidemic of store closures, there’s always more to the story, said Michael Berne, president of MJB Consulting, a Berkeley- and New York-based retail planning and real estate consultancy.
According to Berne, the sudden halt of foreign tourism to San Francisco during the initial years of the pandemic isn’t talked about enough when discussing declining foot traffic—the lifeblood of any retail investment. Moreover, Berne said, the era of multilevel flagship stores, like those once operated by Gap or Forever 21, were already seeing declines during the previous decade, well before the pandemic.
Case in point, before giving up the San Francisco mall, Unibail-Rodamco-Westfield said it planned to shed most of its U.S. portfolio by the end of 2023, citing the need to reduce its debt and refocus on its properties in Europe. It has since opted to maintain a handful of top-performing malls.
More recently, Macy’s, which operates a flagship store in nearby Union Square, announced that it plans to lay off about 13% of its corporate staff, roughly 2,350 positions, and close five stores, including one in San Leandro, in a bid to trim costs. Macy's Inc. is the owner of Bloomingdale’s, the San Francisco Centre’s remaining anchor tenant.
“Layered onto this is a broader changing of the guard,” Berne said. “Many older brands are losing some of their relevance, and the brands that excite the younger generations generally prefer smaller floor plates.”
As for the idea of online shopping killing brick-and-mortars, that would’ve happened already if it were true, Berne said. According to the Pew Research Center, while online sales have steadily increased year over year since 1999, when the U.S. Census Bureau began tracking the figure, they still make up less than 20% of all retail sales in the country.
“Retail only seems like it's dying,” Berne said, citing the Commerce Department’s latest numbers that said consumers continued to spend despite fears of a recession. “But as parts of it contract, other brands far more alluring to Millennials and Gen Z'ers are going to take their place.”
‘We Are Still Here’
But conversations about theoretical economic trends provide little solace to remaining tenants at the San Francisco Centre, who are dealing with urgent concerns like rising operating costs and dwindling sales.
“People keep thinking the mall is closed,” Rabia Waqar, co-owner of Mashaallah Halal Pakistani Food said while making naan in a tandoori oven custom-built for her restaurant inside the mall’s basement-level food court. “But it is not. We are still here.”
After operating a food truck for five years, Waqar and husband Mohammad’s first brick-and-mortar location should have been the culmination of their hard work. Instead, they say the continued exodus of brand-name stores from the mall threatens their future before they even get a chance to write it.
Like the Politrons, the Waqars moved into the mall in 2022 and enjoyed a reliable stream of business up until Nordstrom decamped and Westfield defaulted over the summer.
The menu at Mashaallah, which features North Indian staples like channa masala and biryani and Pakistani specialties like shammi kebab and roasted lamb shank, has already drawn hundreds of positive reviews online. Soleil Ho, the prominent former restaurant critic, recently called it "the best lunch option in downtown SF right now."
So much so, that the couple is willing to keep paying their existing rent agreement as is, said Mohammad Waqar. But before they do, they’d like to see the operators of the mall, whoever that ends up being, invest in bringing in new businesses and reactivating the property’s many vacant spaces.
Tenants received a bit more clarity in October when the courts appointed Trident Pacific Real Estate Group as the mall’s receiver.
As the property’s custodian, Trident Pacific has the authority to manage, reposition and potentially sell the property. Soon after its appointment, Trident Pacific enlisted real estate firm JLL as its property manager to market vacant spaces to prospective tenants. The firm is also responsible for regularly reporting on the property’s financial position.
The receiver reported that last October, it collected around $740,000 in rent from existing tenants against more than $1.9 million in expenses for the property, a not particularly attractive equation. For their store, the Politrons said they’ve been granted a temporary pause in rent as they negotiate a new lease agreement; the Waqars said they have kept paying their rent throughout the management transition.
The new landlord has also invested in placing additional security guards on every floor, several workers told The Standard across multiple visits to the mall last week. That has helped business owners and employees feel more at ease coming to work.
“It used to take security 10-15 minutes to respond to calls,” Brian Politron said. “Now, it’s down to one or two.”
A spokesperson for Trident Pacific and JLL declined to comment on this story.
A Tipping Point
While it’s a bitter pill to swallow at the moment, both the Politrons and Waqars say they do not regret opening their businesses inside what appears to be a dying mall. In separate conversations, they said they believe the location and history of the shopping center still has many positives going for it.
For example, the luxury sector in nearby Union Square is still thriving despite soaring retail vacancies. Nearby, a new Ikea store arrived on Market Street in August to much fanfare.
Meanwhile, the city’s population has also started to rebound after losing some 30,000 people between 2020 and 2021. The rapid decline of San Francisco Centre, on the other hand, is a cautionary tale about how quickly things can unravel when a property owner puts all of their eggs into one basket, as Westfield did with chain fashion retailers, according to Berne, the retail expert.
“Shopping centers like that are built on critical mass,” Berne said. “People go there for options, so once those start to shrink, there can be an exponential decline.”
The citywide retail vacancy rate currently hovers around 6.5%, according to real estate firm Avison Young, more than double the rate in the fourth quarter of 2019. For Union Square, that figure is significantly higher at 18.3%.
There is no exact science on where that tipping point is, but the mall appears to be headed toward it—if it’s not already past the point of no return.
A recent San Francisco Business Times analysis of a report on the mall’s commercial mortgage-backed security loans showed more than half of still-leased space is set to expire by June. Another 11% is set to expire by 2025, and about 25% is leased beyond 2027. The mall’s other anchor tenant, Bloomingdale’s, has a lease that runs until 2046, which makes up the vast majority of that portion of long-term leases.
According to the most recent data from commercial mortgage analytics firm Trepp, the mall's appraised value dropped nearly $1 billion since 2016, from $1.22 billion down to $290 million, as a result of recent events.
If it’s not going to be populated with name brands for the foreseeable future, then the only path forward for the mall will be that of transformation, which can only occur once a change in ownership takes place, Berne said. Only then will the economics change to the point where the rents could lower and a new pool of tenants could surface.
Because of this, the San Francisco Centre mall is likely undergoing its own version of a market reset akin to the commercial real estate glut that is impacting the entirety of Downtown San Francisco.
“The thing about that mall is, as great as it was, it’s been in the same format for four decades,” said Cameron Baird, a longtime retail broker at Avison Young. “The costs of operating it were so high that it probably priced a lot of the emerging tenants out.”
Once a new owner purchases the mall at a steep discount, they won’t be under the same financial pressures that Westfield was under, Baird explained. So similar to the office market, new players will be able to enter the market once a reset gets underway.
“It’s not going to be a short turnaround,” Baird said. “The next owner will have to believe in the long term.”
One useful analog, which could provide a path forward for the property, can be found in Los Angeles. Earlier this month, the University of California purchased the long-shuttered Westside Pavilion mall for $700 million. Coincidentally, the mall saw its decline accelerated by the departure of its Nordstrom store anchor in 2017.
UCLA plans to transform the site into a biomedical research center focused on cutting-edge technologies like immunology, immunotherapy and quantum computing.
For her part, San Francisco Mayor London Breed has pitched multiple suggestions on how to replace the Downtown mall, with ideas ranging from a soccer stadium and lab spaces to a college campus.
Whatever that future ends up being, existing tenants at the mall say it can’t come soon enough.
For the Politrons, the fate of their flagship store is on the line. The couple moved from Santa Cruz to San Francisco solely because they saw the city as a gateway to a global customer base.
“We want to be here,” Brian Politron said. “We just wish [the new mall owners] want us the same.”