Nordstrom to close two stores in Downtown San Francisco

Downtown San Francisco’s retail sector has suffered another blow with a decision by Nordstrom to shutter two stores.

The Seattle-based retailer will close its 312,000-square-foot department store in August at the Westfield San Francisco Centre at 865 Market Street, citing a decrease in foot traffic, the San Francisco Business Times reported.

On July 1, Nordstrom will also close its 45,500-square-foot Nordstrom Rack across the street at 901 Market Street, in South of Market.

The departure of both Nordstrom stores at the end of their current leases marks the end of a 35-year presence in Downtown San Francisco. 

“Decisions like this are never easy, and this one has been especially difficult,” wrote Jamie Nordstrom, the company’s chief stores officer, in a message to impacted employees. “But as many of you know, the dynamics of the downtown San Francisco market have changed dramatically over the past several years, impacting customer foot traffic to our stores and our ability to operate successfully.”

The company said it believes it can better serve customers by focusing on e-commerce sales and its other 16 Bay Area Nordstrom and Nordstrom Rack stores.

Nordstrom opened its Westfield mall location in 1988 and has run the 901 Market store, owned by Los Angeles-based Hudson Pacific Properties, since 2014.

An unidentified spokesperson for the Westfield mall and its owner, Paris-based Unibail-Rodamco-Westfield, told the Business Times in a statement the pending Nordstrom closure “underscores the deteriorating situation in downtown San Francisco.”

“We have urged the city to find solutions to the key issues and lack of enforcement against rampant criminal activity,” the spokesperson said. “The current environment is not sustainable for the community, or businesses, and we are hopeful the city will implement the changes that are so urgently needed.”

The spokesperson declined to comment further about specific criminal activity as well as a chance that Westfield could seek a buyer for the struggling mall. Unibail-Rodamco-Westfield has publicly said it wants to sell most of its U.S. properties this year.

But market conditions and the San Francisco mall’s flagging performance, whose metrics are often excluded from portfolio-wide earnings tallies, make it a difficult sell, according to the Business Times.

The Nordstrom Rack store is approaching the end of its initial 10-year lease at 901 Market Street, and forgoing the option of up to four successive five-year extensions. 

Exercising one of the options would have raised gradually scaling rent from its current annual rate of about $3.1 million per year to about $3.4 million per year, according to a copy of the original lease agreement.  

The Nordstrom closures come on the heels of a decision by Whole Foods this month to close its flagship grocery store at 1177 Market Street, citing deteriorating street conditions. The 65,000-square-foot market had been open 12 months.

They also follow news last week that Office Depot will exit its store at 33 Third Street in South of Market and Anthropologie plans to close shop at 880 Market Street in Union Square.

— Dana Bartholomew