San Francisco Chronicle - (Sunday)
Big crowds, hazy future at Japan Center Malls
Covenants to ensure preserving shops with cultural themes to expire in 2 years
The plague of retail vacancies hasn’t touched the Japan Center Malls in the heart of Japantown, which is almost fully leased.
Japantown, or Nihonmachi as locals call it, is spread over a few blocks between Laguna and Fillmore streets and Post Street and Geary Boulevard. The 113yearold neighborhood has long been a destination for Japanese food, art and cultural events: An anime festival takes place there next month.
But the reason the malls have resisted retail trends isn’t as simple as steady foot traffic or interesting stores. Years ago when the malls and some nearby buildings were sold, the buyers signed covenants ensuring the preservation of Japanesethemed businesses. Those agreements expire in two years, raising concerns among some stakeholders about the future of Japan Center.
Donald Tamaki, an attorney at the Minami Tamaki law firm in San Francisco who was involved in the sale of the mall in 2006,
“Newer generations don’t live in Japantown anymore. They don’t want to take over the momandpop stores.”
Kenji Taguma, editorinchief of San Francisco’s Nichi Bei Weekly
said the sale agreements have been honored thus far.
“But the covenants will expire in two years,” he said. “The community is naturally concerned about what the makeup of the mall will look like and the business model that will enable Japantown to survive.”
In 2006, the twin Japan Center West and East malls, two hotels and a movie theater came up for sale. Four of the five buildings, the Radisson Miyako Hotel and the Best Western Miyako Inn along with the adjacent malls were sold by Kintetsu Enterprises, an Osaka company which owned the properties since 1968, to 3D Investment, a Beverly Hills real estate firm. The hotels, consolidated into the Hotel Kabuki, were later sold to the Blackstone Group, a New York private equity firm.
Today, there are no robotic arms serving meals in restaurants or smart mirrors in clothing stores at stores in the malls. They maintain a simpler appeal for shoppers like Sachiko Suenaga, 71, a resident of Japantown who takes a monthly walk to Japan Center to meet friends and shop for her grandchildren. The stores make up the community, she said.
A good mix of tenants, mostly momandpop stores and restaurants, occupies the place. Shoppers can find akoya pearl rings at Miseki Jewelry, a variety of incense sticks at Kohshi Master of Scents and kimonos at Sakura Sakura. A busy calendar of events — Sunday is Japan Day, with origami and dollmaking demonstrations planned — bring in a steady stream of customers to the malls.
“We’ve been extending leases, up to five years or more, for many of the tenants,” said Santino DeRose, managing partner at real estate firm Maven Commercial and the leasing agent for the malls. DeRose said 93% of the retail space at the malls is leased. The citywide average for neighborhood commercial districts is 88%.
One attraction is a high proportion of food vendors compared with ordinary malls. Of the 55 storefronts in the twobuilding mall, a third are mostly Japanese restaurants and cafes. San Francisco’s Stonestown Galleria has recently adopted this trend, adding many Asian restaurants — but the Japantown malls have always specialized this way.
“The location was important when I was thinking about buying the business,” said Jeff Wong, owner of Osakaya restaurant, a mainstay that’s been at the West mall since 1998. Wong said he took over in March 2018, signing a fiveyear lease that he plans to extend.
As online shopping and declining foot traffic affect most other malls, Japan Center’s unique collection of stores with products not available anywhere else in the city makes it a destination, said Kazuko Morgan, a retail broker with Cushman & Wakefield.
“People like strolling the streets, browsing stores and eating great food in that neighborhood,” Morgan said. “People want to go there.”
But the fear is there will be no requirement to preserve the unique mix of stores when the covenants come up in two years, leaving 3D free to do what it wants with the malls.
“They have been great landlords and really listened to the community about why we wanted these important agreements in the first place,” said Steve Nakajo, executive director of Japantown Task Force, a preservation nonprofit. “But people are concerned about what (3D Investments is) going to do. The concept is, you’re going to stay or sell.”
3D Investments said it plans to maintain Japan Center’s cultural appeal.
“We’re actively engaging current tenants to extend their leases ... we are in discussion with new Japaneseowned and Japaneseoriented retailers to grow that core attraction,” Daniel Byron, director of asset management at 3D, said in an email.
It’s understandable that the community is eager to hold on to what it has. In its heyday, Japantown spread over 36 blocks and is now down to three or four blocks. Formed in 1906 after the earthquake amid antiAsian immigration laws, the thriving community was forcibly relocated to internment camps during World War II. It was further reduced in size in the 1960s when work on the Geary Expressway began which evicted residents and shut down dozens of small businesses.
“Newer generations don’t live in Japantown anymore,” said Kenji Taguma, editorinchief of San Francisco’s Nichi Bei Weekly. “They don’t want to take over the momandpop stores so the (desire) to preserve what’s left is important.”
Some tenants that have extended leases include Uji Time Dessert, which sells ice cream in flavors like sesame, tofu and matcha. William Lee, owner of restaurant Kui Shin Bo, also extended his lease five years in May, he said, after opening in 2008.
“People come here for the businesses,” Taguma said. “That is the core attraction of Japantown, along with the rich history.”
Shwanika Narayan is a San Francisco Chronicle staff writer. Email: shwanika.narayan@ sfchronicle.com Twitter: @shwanika