San Francisco Centre Returns to Market at Deep Discount

The Wall Street Journal reports that San Francisco Centre is back on the market after closing earlier this year. A proposed buyer walked away in July. The 1.5M SF mall has become a conspicuous gap in the city’s broader recovery. In its report on the mall’s new sale process, the WSJ said brokers expect a price no higher than $130M. The property was valued at $1.2B a decade ago.

A Former Trophy Mall Unravels

Before the pandemic, San Francisco Centre ranked among the Bay Area’s strongest shopping destinations. Annual sales exceeded $1,000 PSF, placing it in the top tier of mall performance. The property included Nordstrom, Bloomingdale’s, a nine-screen movie theater, and a luxury day spa.

The pandemic interrupted that performance. The mall closed intermittently for seven months in 2020. When it reopened, shoplifting and homelessness weighed on traffic. Total sales in 2022 were 35% below 2019 levels.

Nordstrom announced its departure in 2023, followed by other retailers including Bloomingdale’s. Six weeks later, owner Unibail-Rodamco-Westfield said it would stop making loan payments and turn the center over to its lenders.

Vacancy and Losses Deepen

By last year, 93% of the nine-level complex was vacant. The property spans more than 1.5M SF and was losing millions of dollars annually.

The lenders were owed $558M when the prior owner walked away. They reached a $130M deal in March with Presidio Bay and Prado Group to buy and redevelop the mall. The transaction collapsed in July after months of due diligence.

Redevelopment Comes With Complications

The failed buyers concluded that the property’s ownership structure and approval requirements made redevelopment too difficult. Bloomingdale’s former space, for example, is owned by Macy’s. Part of the land under the mall belongs to the San Francisco Unified School District and is leased to the property.

That complexity makes retail redevelopment harder even when a large urban site has obvious reuse potential. City officials and retail analysts still expect the mall to be repurposed. CBRE is marketing the property for sale.

One potential bidder, Urban Land Development, is exploring a multilevel sports complex in the former Nordstrom space. The concept could include volleyball and soccer facilities plus the 94 Feet of Game basketball training program.

The Surrounding District Is Recovering

The closed mall contrasts with improving conditions on nearby streets. The WSJ reported strong activity at a new Ross store. Uniqlo is returning to San Francisco with a flagship after leaving the city five years ago. Mi Cocina is also reopening nearby after leaving the mall.

CBRE Senior Vice President Alex Sagues described the surrounding market as healthy, while acknowledging that an operating mall would strengthen the area. The broader city is also benefiting from AI investment, with improving office, housing, and retail activity.

A Longer Ground Lease Helps the Sale

The school district has agreed to extend the property’s ground lease through options to 2082. That change is expected to give potential buyers more confidence in the site’s long-term control.

Green Street said mall prices have increased 13% over the past year. The firm said investors are growing more comfortable with the sector. San Francisco Centre remains an outlier because of its vacancy, losses, and redevelopment complexity.

That contrast makes the sale a test of value for a central urban site without a functioning retail operation. Any buyer must price the real estate separately from the cost of a major repositioning. The ownership interests and approval process add another layer.

Time is also becoming a factor. The property costs millions of dollars each year to maintain even while closed. A person familiar with the matter told the WSJ that the mall will likely run out of cash within months, adding pressure to complete a sale before its cash reserves are exhausted.