Downtown San Francisco Retail Space Heats Up

Operators weighing downtown leases should expect higher first-floor rents as office and visitor demand returns to Union Square.

Updated on Nov. 3, 2026 in Remote Work

Wide photograph of an empty downtown San Francisco street-level retail frontage with tall masonry and glass facades under soft overcast haze. — Uniqlo returned to downtown San Francisco on October 9, 2026, while Nordstrom Rack plans a 51,500-square-foot Stockton Street store as Union Square rents climb 20%. AI Illustration. Upload story photo >

Live Poll

Do you think your city's downtown is getting better for shopping?

Uniqlo returned to downtown San Francisco on October 9, 2026, opening a Market Street store, while Nordstrom Rack has announced plans for a 51,500-square-foot store on Stockton Street in fall 2027. The moves signal renewed retail interest in the Union Square district for operators weighing downtown locations.

Why it matters

Retailers are reading the recovery in office leasing and foot traffic as a reason to return to downtown real estate after the pandemic-era pullback. Office demand has revived as AI companies and new startups and developers have moved into the city, and retail operators are following that traffic.

San Francisco's office vacancy rate fell to 29.3% in the third quarter of 2026, down from a 32% peak in the second quarter of 2023 but still far above 4% at the end of 2019. Union Square retail vacancy dropped to 19.9% as visits rose 8.1% year over year to 3.8 million in the third quarter.

The players

Uniqlo

Japanese apparel retailer known for mass-market basics and a large global store footprint.

Nordstrom Rack

Off-price division of Nordstrom that sells discounted department store merchandise across the United States.

The details

Uniqlo's return came with a Market Street store that showcased T-shirts and tote bags collaborated with Muni, a deliberate move to tie the brand to the city's identity. The company had closed its Powell Street store near Union Square in 2021, when the pandemic reduced foot traffic and remote work spread. Operators are now watching whether rising first-floor prime rents, which climbed 20% versus last year, will push smaller tenants out as larger chains return to the district.

2019: San Francisco was bustling with tech workers and tourists before the pandemic.
2021: Uniqlo closed its Powell Street store near Union Square.
Second quarter of 2023: Office vacancy rate peaked at 32%.
October 9, 2026: Uniqlo returned to downtown San Francisco.
Fall 2027: Nordstrom Rack plans to open its Stockton Street store.

Market Landscape

Uniqlo's 2021 Powell Street closure during the pandemic marked one of the clearest retail retreats from Union Square. Its October 2026 return, alongside Nordstrom Rack's planned Stockton Street store, suggests the district is entering a new cycle of retail reinvestment tied to office demand.

Operators weighing downtown San Francisco leases should factor in rising first-floor prime rents, which climbed 20% versus last year, alongside falling vacancy. Retailers planning expansion should model rent increases and foot traffic gains before committing to long-term space.

The takeaway

Downtown San Francisco retail is recovering as office leasing and visitation climb, which makes the district a live test case for operators reconsidering urban locations. Track first-floor rent trends and Union Square vacancy in upcoming quarters before committing capital to a downtown lease, and have qualified counsel review any lease terms.

What happens next

Nordstrom Rack is scheduled to open its 51,500-square-foot Stockton Street store in fall 2027, a milestone operators can track as a signal of downtown retail momentum.