Whole Foods, Gap, Starbucks: popular chains leaving San Francisco

From Amazon to Gap, consumer-facing chains are closing in downtown San Francisco. Starbucks will soon be among them, reports Yahoo.

Photo: IStock

Starbucks is the latest company to rethink its presence in San Francisco. The coffee giant plans to close seven stores there as of October 22. After the closure, there will be 52 Starbucks locations in the city.

Starbucks did not disclose the reason for the closure.

“There are several factors that Starbucks considers when making the difficult decision to close a store, but it is all part of ensuring a healthy portfolio of stores,” Jessica Borton, regional vice president for Northern California, said in a letter to employees.

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Starbucks isn't the only direct-to-consumer giant to exit the city's market.

Other companies that have recently closed stores in San Francisco include Amazon. The company closed Whole Foods Market just 13 months after it opened earlier this year, and it also closed all four Amazon Go stores in March. Office Depot closed the store in April, and Anthropologie left Union Square after two decades there in May.

Gap also closed Old Navy, Banana Republic and Athleta stores this year, Nordstrom closed its flagship store in August, and Saks Off 5th closed its doors this fall.

The Starbucks stores that are closing are located at Mission and Main, Geary and Taylor, 425 Battery, 398 Market, 4th and Market, 555 California, and Bush and Van Ness. It's worth noting that none of the stores that will be closed are unionized, and store employees will be offered the opportunity to transfer to other locations.

San Francisco is slowly returning to offices

What's behind the closure? Hybrid and fully remote companies may be partly to blame for this.

“Certainly a big factor is that people are working remotely and not coming into those offices as often,” said John Zolidis, president of Quo Vadis Capital. “That has to be one of the driving forces—just less traffic from office workers.”

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San Francisco has the fewest office visits of any major U.S. city, according to foot traffic analytics platform Placer.ai. In August 2023, office visits were down 52,7% compared to August 2019, before the pandemic disrupted operations.

“San Francisco has been the slowest to come back,” said Ethan Chernofsky, senior vice president of marketing at Placer.ai. “It's important to think about what this means for retail more broadly. A lot of people work in a certain place and then shop there and eat there, so that will obviously have an impact... Then even the people who come to the office aren't doing it five days a week.”

Migration patterns, such as people moving out of the city, are also a factor affecting cities across the U.S., as well as San Francisco, Chernofsky said. And if retailers leave the city, it could also lead to fewer visits to the area, forcing companies to further rethink their real estate portfolios.

“We see significant growth potential for new stores in underserved areas of the U.S., including smaller cities, as well as new formats in major metropolitan areas,” Starbucks CEO Laxman Narasimhan said on a call with investors following third-quarter earnings results.

However, that may be changing in San Francisco, with the artificial intelligence boom becoming a bright spot for activity. Just as the tech industry was the first to embrace remote work during the pandemic, it could be a leader in bringing workers back to offices.

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“San Francisco and the Bay Area as a whole is really a tech industry-led market,” said Colin Yasukochi, executive director of CBRE's Technology Information Center. “Over the past six months, we have begun to see growth accelerate in the technology industry. Artificial intelligence is one of those specific areas where companies are really looking to expand - they want to modernize the office space they currently need to provide a better experience for their employees.”

"Challenging operating environment"

Crime and security may also play a role.

On September 26, Target (TGT) announced plans to close nine stores at the end of October, including three in San Francisco and Oakland. Target said crime and retail theft were the reason for the decision to close the stores.

“We cannot continue to operate these stores because retail theft and organized crime threaten the safety of our team and guests and contribute to unsustainable business operations,” the company said in a statement.

According to crime data posted on the city's website, theft ranks first, followed by robbery. This has influenced not only whether companies will open retail space in the city, but also where they choose to expand.

With Starbucks, however, it's a little harder to know whether crime was actually a factor. A company spokesman declined to comment on whether safety played a role in the decision.

“There's not a lot of stuff here that can be stolen and resold,” Zolidis said of Starbucks stores. “Although it’s just a challenging operating environment in terms of employee safety.”

Another factor influencing the positioning of companies in the Golden State may be the approach to the minimum wage law, which takes effect on April 1. The law raises starting wages for fast food workers to $20 an hour.

But if that were the deciding factor for Starbucks, it wouldn't be the seven San Francisco stores, but a much broader group of stores.

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