Mid-Market area a lasting tough sell
Costs, street life keep 2-year-old mall empty
The $150 million retail complex completed two years ago on central Market Street in San Francisco was supposed to be bustling with business by now, a centerpiece of the highly promoted revitalization of the Mid-Market neighborhood.
Instead, the only people coming or going from the six-level shopping center are commuters who park in the building’s 167-car, subterranean garage. The rest of the building sits empty, and property owner Chris Maguire of Cypress Equities said no leasing announcements are imminent.
“Unfortunately, I do not have anything new to report,” he said. “We continue to negotiate several potential leases, and it is taking much longer than we would like to complete the deals.”
The 250,000-square-foot mall was completed in the fall of 2016, and its name was changed from Market Street Place to 6X6, a reference to the building’s six floors of retail and a way to embrace its proximity to gritty Sixth Street. At the time, then-Mayor Ed Lee called the retail complex, in the works for a decade, a key component in bringing new economic life to central Market Street, which had been in decline for decades.
While generally declining retail sales and the high cost of doing business in San Francisco have contributed to the project’s problems, the owner says Mid-Market’s street life — litter, panhandling, open drug use and a significant homeless population — has also driven away potential tenants.
Two leases — one with a Japanese food market and one with a movie theater operator — fell through in the past month after construction
costs came back too high to make the projects economically viable. A recent Office of Economic and Workforce Development memo on the project blamed the scuttled deals on a combination of a weak retail sector and high construction costs.
A different reason was cited for a third potential tenant pulling out: “A third large entertainment user withdrew from negotiations after the CEO and COO saw various news reports and a subsequent visit during which they saw ‘defecations, shooting up etc.’ ”
Maguire said unsavory street activity has been a factor in scaring off potential tenants, but not as much as costs of building or the decline of brickand-mortar shopping.
“If you are not used to it, the homeless problem can be threatening and intimidating,” Maguire said. “It is something that is real and has to be addressed, and I am confident it is being addressed. But if that was the only issue, we would be leased up by now. Throw in the costs and retail thinning out generally and you have a challenging environment.”
Cypress Equities’ struggle to fill the empty mall comes after a six-year period in the revitalization of Mid-Market Street, which has been a top economic development priority for the city. During that time, the city successfully lured companies such as Twitter, Uber, Dolby and Square to the neighborhood by offering a tax break.
New apartment buildings have popped up. Long-empty buildings have been revived with new uses. The American Conservatory Theater repurposed the Strand, which previously had been a porn theater, while the Kor Group spent tens of millions of dollars building out the trendy Proper Hotel at 1100 Market St.
But for all the investment that has poured into Market Street, not all of the news has been positive. Some businesses hoping to ride the revitalization wave have failed, including hyped restaurants like Bon Marche Brasserie and Cadence. Drug dealers and addicts continue to do brisk business along Market Street, especially around Seventh and Eighth streets and United Nations Plaza.
And other projects have taken a lot longer than expected. Work on the hotel and condominium project at 950 Market St. is expected to start next month, more than 18 months after the city approved it. The project, with 242 hotel rooms and 232 condominiums, will likely open in early 2021. The 186-unit residential building at 1028 Market St. was approved in January of 2017 after a sixyear process, but construction still hasn’t started. Local developer Shorenstein has started work on its 304-apartment project at 1066 Market St., and it is expected to open in 2020.
All are within a block of 6X6, and long stretches of Market Street are now construction zones.
Joaquin Torres, director of San Francisco’s Office of Economic and Workforce Development, said activating 6X6 is important to the city.
The city recently granted planning permission to convert about 47,000 square feet of the building to office space, which owner Cypress Equities says has attracted high interest from tenants.
Torres said Mayor London Breed is focused on improving the conditions on Market Street — the city budget adopted this month includes an additional $13 million for comprehensive street cleaning and $60 million in new funds for homeless programs.
He said residents and businesses along Market Street, as well as blighted areas South of Market and in the Tenderloin, would see quick improvements.
“They will see the difference and know they have a partner in the city, from the mayor on down,” Torres said. “MidMarket continues to be a priority for our office, the mayor and other city departments.”
Over the last six years, several retailers, including Target, Trader Joe’s and Saks Off 5th, looked at 6X6 only to choose existing spaces nearby. Other deals that fell through included a 130,000-square-foot lease with J.C. Penney and a smaller deal with the now-bankrupt Golfsmith.
Meanwhile, other retailers are adjusting to fewer brickand-mortar customers. Macy’s closed its Stonestown store, sold its men’s store and is downsizing its main Union Square outlet.
“Five floors of retail in today’s world is tough — many buildings in San Francisco, some in Union Square, are in the same boat we are in,” Maguire said.
Carol Gilbert, who heads up the retail leasing business CGI Retail, said that 6X6 has been too picky in selecting tenants and needs to narrow its focus. She said the developer’s best bet is a combination of food and entertainment — bowling, movies, fancy salons, virtual reality gaming.
“There has been too much flexibility — you have to pick a horse and ride it,” she said. “You have to start someplace, and entertainment is as good a place as any.”
Jane Weil, a neighborhood resident who sits on the board of the Central Market Community Benefit District, said she isn’t surprised that 6X6 hasn’t filled faster.
“The reality is the street scene is as bad as or probably worse than it’s been in the last two years,” said “I can see why retailers would be scared away.”
Meanwhile, commuters continue to be the only people entering through 6X6 ’s soaring glass doors.
“The parking lot is doing great,” Maguire said.