Westfield, owner of the San Francisco Centre above, will partner with Forest City Enterprises to add 1 million square feet of space to the existing facility.

When it comes to retail in San Francisco, the focus has always been north of Market Street in the Union Square area. But for the last 20 years, south of Market Street has been inching its way toward a complete retail rebirth and has most likely become the largest redevelopment area in San Francisco.

It’s no wonder, then, that two of the nation’s leading shopping center developers took note of a unique retail opportunity that would place them front and center in the area’s urban retail development push. Westfield’s San Francisco Centre, a 500,000-square-foot vertical mall, butts up against Forest City Enterprises’ six-level property that used to house the Emporium department store at the corner of Market and 5th in downtown San Francisco. So when the idea came up to connect and jointly market the two projects at last year’s ICSC trustees annual retreat in Cabo San Lucas, neither company hesitated for a second. Jim Ratner, executive vice president at Forest City Enterprises, and Richard Green, vice chairman of Westfield America, say the connection was obvious.

“It made all the sense in the world to combine these properties to create a natural flow for the consumer from one side to the other,” says Green.

The new retail partners have crossed paths on several occasions but never before joined forces on a project. Now, after what both sides call an “easy and compatible” partnership, the companies will have a 50/50 interest in what will be the second-largest urban retail development in the country, the new 1.5 million-square-foot San Francisco Centre. (The largest is the 1.6 million-square-foot Carousel Center in Syracuse, New York.) The joint investment will reach $390 million and is expected to generate $500 million in annual sales.

The old Emporium department store is located at 835 Market Street, just south of Union Square. Originally built in 1896, the Emporium had a huge, 102-foot glass dome, which brought a flood of light into the building. The top three floors of the original building consisted of office space, but as the years went on and additions were needed, the dome and its light bearing qualities were covered up.

When the earthquake and the great fire of 1906 happened in San Francisco, everything burned down with the exception of the building’s front façade and part of the steelwork for the magnificent dome. The department store was rebuilt in a much grander style in 1908. It went through a number of owners until Federated Department Stores took over the Emporium chain in October 1995. Due to changing consumer tastes, Federated closed the department store and opened a Macy’s furniture store, but eventually shut down the entire building in 1998.

Around that time, Forest City was approached by Federated about putting a Bloomingdale’s on the site. Federated recognized that to construct a Bloomingdale’s by itself would require enormous costs related to retrofitting the space for modern-day earthquake standards. The only way to justify a Bloomingdale’s would be as part of a much larger project. So they brought in Forest City to do a mixed-use development on the site. Best known for rehab projects such as New York’s Harlem Center and Cleveland’s Tower City Center, Forest City Enterprises was given the charge to finish the entitlements, design and drawings for the center. At that point, Westfield America, a $10.2 billion division of Australia’s Westfield Group, will step in to build the project and oversee the leasing and management.

Westfield, known for its branded centers called “Shoppingtowns,” leads the mall landscape in California. The mall veteran was the natural choice for development, leasing and management of the new San Francisco Centre, according to Brian Jones, president of Forest City Development.

“Westfield already had an ongoing management team in San Francisco, and happens to own more shopping centers in Northern California and the Bay Area,” he says. “So from a management and leasing point of view, it made sense.”

Both companies bring a great deal of expertise and financial strength to the project. On the physical side, Westfield brings to the table the existing San Francisco Centre, which does $529 of sales per square foot and includes a very successful Nordstrom as well as specialty retailers, such as Bebe, Chico’s, Abercrombie & Fitch, Kenneth Cole, Nine West, J. Crew, Brookstone, Papyrus and Bath & Body Works. Forest City brings the Bloomingdale’s commitment, as well as a unique “past/present” design.

The properties in essence mirror one another on six levels, with openings at each level. Forest City brought in Baltimore-based RTKL as executive design architect and KPF (Kohn Pederson Fox) to design the shell of the Bloomingdale’s building, which will feature a glass façade. Fronting Market Street will be retail with the façade of the original building. And the three office floors will take on the façade of the original office space. The building’s famed glass and steel dome will be restored to the way it appeared in the early 1900s and lifted from its current placement up higher so it matches the height of the new building.

“For the first time since 1922, the dome will again be open to the sky,” notes Jones.

The existing San Francisco Centre is very popular and very well used, according to Marcia Rosen, executive director for the San Francisco Redevelopment Agency.

“Combining these two centers together into one larger, well-managed center with a variety of stores, and with two very popular department stores anchoring it, will have a lot of support locally,” she says.

But there was some initial concern on the part of some residents. Developers were sued on the basis that the project’s environmental impact report was inadequate. The litigation delayed the project for more than 2 years, but has been resolved in favor of the city. Since that time, the project has been downsized from what it was at the time the litigation was brought. Initially, there was going to be a hotel tower, but due to the downturn in San Francisco tourism, the hotel industry has been suffering somewhat in the city, and lining up a hotel operator was delaying the beginning of construction on the center.

With ground breaking set to begin sometime this month, the developers will work on a 36-month schedule with plans to open the new center in fall 2006. When complete, the project will be the largest urban shopping center west of the Mississippi, and will feature the second-largest Nordstrom (312,000 square feet) and the second-largest Bloomingdale’s (340,000 square feet), each of which will occupy five levels. Above Bloomingdale’s will be a 3,200-seat Century Theatres/CinéArts multiscreen cinema, and below ground there will be an international food market and retail stores around a BART subway station. There is also a large parking deck nearby, across from Mission Street — an unusual feature for an urban property.

The current San Francisco Centre has roughly 500,000 square feet, 300,000 of which belongs to Nordstrom. The new development will have a broader array of retailers with a major statement in restaurants and entertainment. “We will have an expanded array of specialty tenants that will expand on the successes of the existing San Francisco Centre,” says Green. “We will go up to 200 specialty stores, and we will have under one roof a very exciting atmosphere for the consumer.”

The Economic Impact

Located at the apex of the city’s downtown retail center and its convention/cultural district in the Yerba Buena Gardens area, the new San Francisco Centre will connect and intertwine the two districts, according to Rosen. Yerba Buena Gardens is an older redevelopment project area with beautiful public gardens and many museums and tourist hotels, including The Four Seasons, which opened last year, and, currently under construction, the St. Regis Towers, a five-star hotel with luxury condominiums and a new museum incorporated in the tower. The area also includes the Yerba Buena Center for the Arts and a children’s museum, and is adjacent to San Francisco’s convention facilities, including a brand new addition.

Directly west and adjacent to the district will be an in-fill redevelopment project area, which should be adopted by the end of this year. So in a sense, says Rosen, the new district will also serve as the anchor and economic stimulus for further revitalization of the downtown Mid-Market area.

Also under construction, just a block away from the center, is a 450-car underground garage with a new public plaza and the site for the new Jewish Museum and Mexican Museum.

“This new center is really going to be the center of a lot of activity, both connecting existing, well-established districts and anchoring new development to the west in the Mid-Market area,” Rosen adds.

The center also has great importance, says Rosen, because it is viewed as the heart of a local and regional tourist economy, not just a national or international attraction. It is expected to attract approximately 25 million shoppers annually.

“We believe the center will be a magnet for the regional tourist economy because of the Bloomingdale’s and Nordstrom, both being the second largest in the country, and the variety of shops and entertainment within the center itself and in very close proximity to the center,” she says. “Businesses, residents and stakeholders in the adjacent areas — Yerba Buena, Union Square and Mid-Market — are all anxiously awaiting the new center, believing that it will be a real plus to surrounding businesses.”

The center will result in close to 2,000 new jobs, 770 construction jobs, about $10 million a year in taxes, a commitment to provide more than $40 million for affordable housing over the next 30 years, and improvements to the public transit system and the public plazas that are across the street from the development.

“The public at large stands to benefit not just from the completed development and turning what’s now a very blighted area into a beautiful new attractive development, but also for the economic impact,” says Rosen. “All of those things will enhance the quality of life for San Francisco residents, workers and visitors.”

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