Christine Yuen, head of leasing at San Francisco’s 3.3 million-square-foot Embarcadero Center, never thought she would find herself handing out business cards at her neighborhood farmers’ market.
Yet there she was, a BXP vice president, trying to convince a bagel baker who’d never had a brick-and-mortar presence to consider taking space in the office, hotel and shopping complex.
“They think of downtown as this big expensive place with these institutional owners, but we’re just people,” she said of her pitch to small business owners. “Just come have a cup of coffee and talk about how to make downtown a better place.”
Yuen was doing outreach for the BXP-owned center’s “retail activation initiative,” which meant looking beyond the usual national tenants to fill its 300,000 square feet of retail space. Seventy of the complex’s 90 pre-pandemic vendors got modifications on their leases to help them stay afloat after the city shuttered in March 2020, she said, and even then, many didn’t make it given the paltry foot traffic downtown.
Meanwhile, San Francisco’s farmers’ markets and neighborhood commercial strips have been buoyed by the same remote workers who used to come downtown, and Yuen’s team wanted to meet face-to-face with the small business owners there to sell them on the downtown space.
Office tenants may make up the majority of users at the North Financial District complex known for its four towers overlooking the waterfront, but the retail on its lower floors is so intrinsic to the complex that, just before Thanksgiving every year since 1987, 17,000 lights turn on to outline the buildings and kick off the holiday shopping season.
“Retail is the front door to our office building, and if it’s not feeling vibrant and active, we’re not going to be able to fill the buildings,” she said.
Yuen’s team isn’t alone in thinking that the city’s mom and pops could turn the lights back on in San Francisco’s downtown, where one in three offices are still empty and national retailers remain wary.
Vacant to Vibrant, a public-private pop-up partnership run by the nonprofit SF New Deal, is based on the hypothesis that a little free rent for retailers can stimulate downtowns and then pay dividends by attracting the office tenants that actually secure the financial future of the buildings. The program is expanding within the city itself and has even begun influencing other markets, such as Austin, that are dealing with similar downtown dilemmas.
Using small businesses to fill empty storefronts “is not like a rocket science idea,” said SF New Deal Executive Director Simon Bertrang. Vacant to Vibrant’s innovation is being a matchmaker middleman that can mediate between big landlords and small businesses owners and deal with some of the logistical challenges that go into opening a new retail space.
“It wasn’t just that there needed to be a small business owner matched with a property owner. We need to support both of them,” Bertrang said. “The power was committing ourselves to the practical details of, how do we actually make this happen?”
BXP’s leasing team for Embarcadero Center decided to work with Vacant to Vibrant on the first cohort of pop-ups in 2023, and four of the pop-ups from the pilot program ended up signing long-term leases at the downtown property. When the second cohort kicked off this year, the building signed up to take four more.
“Because of Vacant to Vibrant’s efforts, more retailers are asking, ‘Is there a space available for me?’” Yuen said. “We’re not the one to always pick up the phone. They’re calling us too.”
From pop-up to permanent
Vacant to Vibrant’s original premise was simple: It gave small businesses up to six months of free rent in an empty second-generation space in the hard-hit Financial District. The property owner would sign the pop-up lease with SF New Deal, which would also get the insurance, go through the permitting process with the city and provide a grant of up to $8,000 for start-up expenses.
The business got a relatively risk-free way to experiment with having a spot downtown, and the building owner got to choose from a few vetted businesses in the program’s three categories — arts and entertainment, food and beverage or retail — to find the ones that best fit its property’s needs, Bertrang said. Small businesses were enthusiastic. More than 800 submitted applications. But national owners and managers were reticent about turning over their spaces to start, he said.
“It was not their go-to to sign an under-resourced small business who might never have opened a storefront before,” he said. “That is not what they were looking for pre-pandemic.”
San Francisco is still verboten for some national retailers, said Cameron Baird, SVP of retail leasing at Avison Young. There was less than 4% retail vacancy in the city pre-pandemic with an average direct asking rent of about $45 per square foot on triple-net leases, according to Avison Young data. In the third quarter of 2024, there was 6.4% retail vacancy and asking rents had fallen to $30 per square foot.
“More retailers are asking, ‘Is there a space available for me?’ We’re not the one to always pick up the phone. They’re calling us too.”
“Folks don’t want to come until the office people are here, and the office people don’t want to come unless there’s a compelling reason to come downtown like restaurants and retail,” he said. “You’re sort of stuck in this limbo.”
The days of thinking about ground-floor retail as a profit center are gone for now, Baird said. Instead, the spaces have become an amenity to draw the office tenants, which have their choice of buildings.
“Owners understand where their rents are coming from,” Baird said, adding that small businesses provide the bonus of being more flexible than national tenants. “Some of these local tenants can curate what they do to the environment that they’re in and they can be creative with spaces more nontraditional than what a Starbucks needs.”
After seven of the nine businesses in the first cohort ended up signing on for direct, long-term deals, SF New Deal’s Bertrang said that the second round of pop-ups this summer became a much easier sell to owners.
“The value of the program is evident to them, based on the conversations that we’re having,” he said.
He’s even getting unsolicited calls from owners offering their ground-floor spaces for free if Vacant to Vibrant enters other neighborhoods. SF New Deal is trying to oblige. It received $3 million in funding from the mayor’s office and the Office of Economic and Workforce Development to expand the program into such areas as Union Square, which has 23% retail vacancy, according to Avison Young. It also raised $1.2 million in private funds, largely from Wells Fargo, to offer grants of up to $40,000 and technical assistance for its “Pop-Up to Permanent” program geared at businesses that end up signing direct long-term leases.
“We want the small business owners to be able to have a place at the table and not just come in, create some vibrancy and have to exit,” Bertrang said.
If one new pop-up opens each month, and some of those become permanent, he expects to see “a significant cultural and commercial impact on the way that downtown is seen by the city, by the region, and is experienced when people do come downtown.”
Even in the short-term, the openings have shaken up the “doom loop” script for downtown and helped property owners get back to business, Baird said, providing “faces for landlords to negotiate with” instead of trying to make deals in a vacuum.
The retail agent said that the program is the bullhorn owners needed, one that lets them shout: “Hey, tenants! There’s some deals to be had. Come down here and explore and see what you can get.”
A big movement to go small
Since San Francisco’s pop-up program began last year, other cities facing the same downtown headwinds have gotten in touch with SF New Deal, including New York City, Philadelphia, Orlando, Seattle, Louisville, Denver, Miami, Pittsburgh and Portland.
When the Downtown Austin Alliance was looking for inspiration, it saw a lot to like in Vacant to Vibrant, according to Jenell Moffett, chief impact officer at the association. Like San Francisco, Austin has a large tech community that can now work remotely, and while its population growth in the early days of the pandemic helped to stave off some of the effects that San Francisco saw immediately, Moffett said that by 2023, there was a definite “void” downtown.
The delayed impact left property owners unsure as to whether they should buy into the idea of a pop-up program, she said, especially if it required some level of improvement work on their empty properties. Vacant to Vibrant’s impact in San Francisco got Austin owners to see that “we’re not pulling this concept out of thin air,” she said
“We’ve had to show them, this is not new. It’s not unique,” she said. “So if they can meet us halfway and replace the windows, clean the floors, fix the plumbing, we now can activate and bring some attention to your business, your property, your street — and therefore help in the recovery of downtown.”
The Austin program launched in June with two outdoor spots and one storefront on Congress Avenue. Its first iteration has been to host pop-ups lasting a week at most, with more than 20 events such as art classes, performances, weekend markets and panel discussions with local tech companies. Moffett said there’s an ongoing “open call” for new ideas.
“If y’all have some creative thing you want to do, and you couldn’t have done it otherwise, submit a proposal,” she said.
Some of those small business “activators” have rented space repeatedly, and the goal is that they’ll eventually negotiate long-term deals with the property owner directly, she said.
“The activation piece is a great way to just start and splash in the market,” she said. “Then, once you have some proven concepts where people benefited from being in high traffic, concentrated centralized areas in the city, it gives more trust and potential to invest in a longer-term solution.”