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High Hopes for Retailing in S.F. -- and Maybe L.A.

A tall mall must draw shoppers in and up. It could serve as a model for other cities.

September 28, 2006|Roger Vincent | Times Staff Writer

SAN FRANCISCO — A new style of high-rise mall that may serve as a model for downtown Los Angeles and other big city centers will open its doors here today as the largest urban shopping center west of the Mississippi River.

The expanded San Francisco Centre in the heart of this city's historic commercial district at 5th and Market streets combines department stores, supermarkets, movie theaters, restaurants, shops, a spa and office space in two buildings, one nine stories and the other eight.

City leaders hope that the mall will further invigorate once-seedy Market Street and serve as a bridge between Union Square -- now the city's main shopping attraction -- and the grittier former industrial district south of Market Street known as SoMa, which includes new museums and hotels.

If successful, San Francisco Centre eventually could be a blueprint for renewing the once-vaunted shopping district of downtown Los Angeles, experts said. But it is a bold and risky bet that residents and tourists will frequent a so-called vertical mall that goes upward instead of outward in the style of most sprawling suburban shopping centers.

"Most American consumers, save for San Francisco and Chicago, aren't really attuned to vertical retailing," said Peter Lowy, chief executive of U.S. operations for Sydney, Australia-based Westfield Group, which owns the mall with Forest City Commercial Group. "Even New Yorkers tend to not shop vertically unless they are in a department store."

Los Angeles' most recent experiment in vertical malls, the four-story Hollywood & Highland Center, was widely shunned when it opened in 2001 in part because shoppers found it difficult to navigate. The developer sold it at a loss of hundreds of millions of dollars, and the new owners have labored to make it easier to get around inside.

Angelenos are expected to get another taste of vertical retailing in the $1.8-billion Grand Avenue project planned for Bunker Hill downtown that is to include a grocery store, shops, theaters and other entertainment features. Construction is slated to start next year.

But a high-end reworking of some of Los Angeles' historic department stores that have long since been turned to other uses will probably have to wait several years because downtown L.A. lacks the density of San Francisco.

Not enough people live in downtown L.A. yet, and it would take a lot of new development to restore its long-lost reputation as a daytime shopping destination, said Los Angeles retail consultant Greg Gotthardt of Alvarez & Marsal. San Francisco is also hotel-rich, with about 15,000 rooms near the city center, compared with about 3,000 rooms in downtown L.A.

Nonetheless, many shoppers are ditching traditional indoor suburban malls for so-called lifestyle centers that mimic Main Street, such as the Grove in the Fairfax district of Los Angeles.

The expansion of San Francisco Centre, which cost $460 million, is part of an industry trend toward making existing successful malls much bigger by adding shops and other uses, including apartments and condos. With the new addition, San Francisco Centre has tripled in size to 1.5 million square feet.

Remodeling and ambitiously expanding malls "is clearly something that is going to continue to happen across the U.S.," said competitor Art Coppola, chief executive of Santa Monica-based mall operator Macerich Co., which is also expanding some of its malls.

Retailers prefer to join proven centers, and the neighbors are less likely to object to expanding an existing center than they would to the creation of a new one.

And if the properties are near public transit hubs, public officials are often quick to approve the addition of office space and residential units, Coppola said. "It makes sense because it's smart growth."

San Francisco Centre is above an underground rail station and along one of the city's busiest bus routes. Across Market Street, the city's main thoroughfare, a turntable spins cable cars around and relaunches them back up Nob Hill toward Fisherman's Wharf.

"The whole mid-Market area has been difficult, but now I think it will come to life," San Francisco Mayor Gavin Newsom said. "It will ignite some long-range development."

He said he was also looking forward to the 25 million visitors the mall is expected to attract and the estimated $18 million it should contribute to the city's general fund through taxes.

The expanded San Francisco Centre combines the original Centre, a nine-story venue that opened in 1988 with a Nordstrom store, with an aged eight-story building that once housed the Emporium. It will contain, among other things, the nation's second-largest Bloomingdale's and a gourmet Bristol Farms market.

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