'We Have To Open Retail': San Francisco's Still In High Demand
San Francisco is continuing to see a strong demand for retail space despite struggling to increase occupancy in the city, according to retail tenants, brokers and developers.
The city's complex zoning code, byzantine permitting process, formula retail limitations and difficult economics tend to muffle that demand.
But some retailers have found success with experiential retail in S.F., where tenants like Fort Point Beer Co. see ample reason to set up shop.
"We really feel like we have to open retail spaces in order to better tell our story," Fort Point co-founder and CEO Justin Catalana said at Bisnow's The State of Retail in the Bay Area event Thursday morning.
Founded in 2014, Fort Point set up its brewery in the Presidio, operates a kiosk in the Ferry Building, and is now readying a tap room at 742 Valencia St. in Mission District. The company expects that tap room to open in the fall and has purchased Black Sands Brewery in the Lower Haight to further boost its retail presence.
The beer company's opening on Valencia is an example of a movement by both traditional and nontraditional retailers that are attempting to provide an experience, via targeted offerings at locations and the decision to have brick-and-mortar stores in the first place.
Like e-commerce companies realizing the value of their customers experiencing brands in-person, traditional retailers and still-young companies increasingly see a point to having their own locations.
"The Valencia location will be the first true expression of Fort Point in a retail setting," Catalana said. "We will be showing the brand, who we are as a company, our company values, to the consumer, instead of them just having that experience through another bar or restaurant."
The perceived authenticity of the brand itself also influences the customer's encounter with a store and the retailer's long-term success, according to Colliers International Executive Vice President Julie Taylor, who represents both institutional landlords and tenants.
Landlords are starting to adjust their ideal tenant profile accordingly.
"It's really the acclaim that's associated with the business that's serving as your credit," she said.
Traditional retailers tapping into experiential for success is also affecting design, said Studio KDA principal Marites Abueg. Good design once meant solid form and function, the quality of scale or ergonomics of a space, but design architects now look for ways to showcase a company's brand.
"What we're focusing on now is the brand's story, because people want to connect to the values of the businesses that they support," Abueg said.
Abueg and Studio KDA recently led the design of a new Ne Timeas Restaurant Group project, the Flour + Water Pizzeria in the Mission. The architect decided to pair the restaurant's focus on quality ingredients with an understated design evoking authenticity.
In addition, the restaurant is designed to accommodate newer consumer preferences, like speed. Both parties agreed that a separate entrance for takeout and express diners at the new pizzeria brand was essential.
"You can complain that everyone is eating in their home, or you can do something about it," Ne Timeas founder and Executive Chef Thomas McNaughton said.
In their biannual report, Allen Matkins and UCLA Anderson recorded surprising bullishness for Bay Area retail (alongside equally surprising pessimism for the multifamily market). The change of heart could stem from a combination of growing regional disposable income, a supply correction and potential vacancy solutions on the horizon.
But part of it may be retailers and landlords better adjusting to modern consumer tastes, offering customers the quality and type of experience not found in e-commerce. For retailers, that would be a welcome sign in what many San Franciscans see as an unwelcoming retail environment.