San Francisco Retail Market Report

The CBD continues to benefit from improving foot traffic. Downtown San Francisco has struggled in recent years due to a slow recovery in office utilization, which has reduced daytime foot traffic and strained public safety in the commercial node. However, signs of an inflection point are emerging. The AI boom is helping to lower office vacancy rates, and policy efforts under Mayor Daniel Lurie’s downtown recovery agenda are improving downtown pedestrian activity. Specifically, Lurie’s “Heart of the City” initiative emphasizes public safety, street conditions, and pedestrian infrastructure. Tourist-oriented areas such as Union Square and Fisherman’s Wharf, where retail vacancy remains near or above 10 percent, are likely to benefit most. In contrast, neighborhood corridors, including Fillmore Street and Japantown, have remained more insulated from downtown weakness, positioning themselves for continued improvement in 2026. Retail conditions have also been comparatively stable in San Mateo County, where vacancy has remained in the 5 percent range since 2020.