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Westfield Gives Up San Francisco Mall, Signaling More Pain Ahead

Mr. Yasukochi said that was partly because of what was sometimes described in the industry as “extend and pretend.” Banks are reluctant to seize nonperforming properties because of the commitment required to finding tenants and because they would often be taking over the property at a loss. Instead, they reach accommodations with their borrowers and try to wait out the crisis in hopes that the market will turn around.

Will the delaying tactics work? “It depends how long you can pretend for,” Mr. Yasukochi said.

In many cases, retailers in urban centers are voluntarily choosing to depart. In San Francisco, Nordstrom said it would close its longtime store at San Francisco Centre in August, which will leave the mall 45 percent empty. Anthropologie closed the downtown location it had for two decades in May.

In New York, Neiman Marcus closed its Hudson Yards store — its only one in Manhattan — in July 2020, after a bankruptcy and a little over a year after its grand opening. In downtown Seattle, Nike shuttered the NikeTown store in January that it had operated since 1996. The outdoor retailer REI said it would close the store its had in downtown Portland for two decades when its lease expired early next year.

Foot traffic is slowly recovering in downtowns, but for many retailers sales haven’t come back to pre-pandemic levels, making it unsustainable to continue paying the high rents in prominent downtown centers.

Westfield isn’t the first mall owner to decide to leave a longtime downtown shopping center. Last year, Brookfield Property Partners relinquished Chicago’s Water Tower Place, the mall that anchors the Magnificent Mile, an upscale commercial district. The shopping district had grappled with lower foot traffic and noticeable retail vacancies since the start of the pandemic. More than half of the space in Water Tower Place is vacant, including an anchor store location that was a Macy until 2021, according to Cushman & Wakefield.

In 2022, when Macerich sold its 50 percent stake in the other mall in the Magnificent Mile — the Shops at North Bridge — it took a nearly $30 million loss.

Malls, in general, are in tough spot. Since 2016, malls in the United States have lost 50 percent of their value, according to data from the advisory firm Green Street. Indeed, Westfield’s decision in San Francisco is part of a broader strategy by its parent company, Unibail-Rodamco-Westfield, to greatly reduce the number of malls it operates in the country.

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Mohammad SHiblu

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