Luxury fashion retail is not dead

Is the world of luxury retail in San Francisco’s Union Square district dying? 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, the real estate firm Cushman & Wakefield released a report on the city’s retail market, which found that Union Square reached a new peak vacancy rate in the first quarter of 2024, clocking in at 20,6%. A situation generally explained by experts as the result of rising taxes, the general decline of retail to online shopping competition, and the accelerating crime rate in this part of San Francisco.

Last spring, the announcement that the Macy’s department store would close in 2025 was another disappointment. An event that coincided with the global plan to close 150 stores by 2026. With the closure of 700,000 square feet of space, some 34.5% of Union Square may soon be vacant.
 
While no name has yet been announced to take over the Macy’s building, San Francisco Mayor London Breed recently declared that “the city will continue to work closely with Macy’s and any potential new owner to ensure this iconic location continues to serve San Francisco for decades to come.” Breed said that “there is tremendous opportunity at this site, and I know this city will continue to draw new investments and ideas.”

Nearby, on Market Street, the situation doesn’t look much better. After the closures of Anthropologie, Saks Off 5th and department store Nordstrom last summer, L’Occitane closed its store 4 months ago on the Emporium Centre’s first floor, ending more than two decades at 865 Market Street. In return, an Ikea store opened its doors in August 2023, revitalizing an abandoned part of Market Street. The same sad fact applies to Post Street, another of Union Square’s flagship thoroughfares, where TheRealReal, the famous second-hand luxury fashion store, closed its doors last year, followed last May by jeweller Shreve & Co, leaving a 15,000-square-foot space vacant.

Maiden Lane, a 19th-century brothel turned luxury temple in Union Square, and a pedestrian mall that stretches two blocks between Kearny and Stockton streets, is now almost entirely devoid of shops. A ghost zone, say some locals, particularly hard hit by COVID. With the closure of Jimmy Choo, Marc Jacobs, Crate & Barrel and Alexander McQueen stores, only a few fashion addresses remain, such as Martin Margiela and the Isaia boutique designed by architect Frank Lloyd Wright. 
 
In this moribund atmosphere, it’s not all bad news. Many of the major players in the luxury goods industry still remain in Union Square, and expansion projects are springing up all over the place. Louis Vuitton and Hermès still watch over Union Square on Geary St and Grant St. The 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, watchmaking is making a remarkable comeback with the opening of the Patek Philippe boutique in 2023 on Post Street, followed in last March by German luxury watch retailer A. Lange & Söhne. Lange & Söhne. In June Swiss brand Breitling opened its 29th boutique in the United States. Together with Rolex, they form a new international destination in the fine watch market.

Other luxury projects are still to come in the next months as Chanel has acquired the William Sonoma kitchenware boutique at 340 Post Street. The $63 million sale will enable 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 real estate company Gosvernor for a 9,000 square foot space across multiple levels at their downtown property. “This latest lease transaction highlights the ongoing evolution and importance of Union Square in the luxury retail landscape,” said Marisa Rodriguez, CEO of the Union Square Alliance, a business improvement district for Union Square. “This move, alongside recent news of Chanel’s expansion and the entrance of prestigious watch brands like 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 closure, including the iconic Gump’s, the luxury American home furnishings and home décor 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 unwelcoming to visitors from around the world.”
 

If the luxury market is definitely not dead in Union Square, the next few years should see many buildings convert part of their floors to housing. Shortly before the summer, San Francisco City Hall also made it a priority to convert Powell Street into the city’s premier retail and hospitality destination, and committed to improving Maiden Lane alley.

Still ranked as the second richest city in the USA, San Francisco is also seeing other pockets of luxury retail develop. On Sacramento Street, the chic retail street of Presidio Heights neighborhood, Sherri McMullen has just opened her second multi-brand store after a first one in Oakland. On the same sidewalk are two other quality multi-brand stores as Betty Lin and the iconic Susan. New York designer Rachel Comey recently chose the Fillmore District to present her collections to the neighborhood’s many women and mothers.
 
Finally, Palo Alto, in the heart of Silicon Valley, confirms its excellent health in the luxury retail sector. Considered one of the richest cities in the USA, with a median household income close to $190,000, the city boasts several luxury malls, including the Stanford Shopping Center, which today houses all the top fashion and home furnishing brands.