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Street Beat

Challenges and growth seen ahead for Union Street shops

Union Street might have the flexibility to diversify, unlike other shopping streets. photo: Earl Adkins

This is the second of a three-part series on the state of Union Street.

I’ve seen it go through many transitions, and we always come out on top,” Lesley Leonhardt says of her 30 years as owner of Images of the North, a gallery of fine Inuit art at 2036 Union Street. Leonhardt also serves as executive director of the Union Street Association, one of the most active merchant groups in San Francisco. “We work very hard to keep a good mix; a balance … to keep it interesting,” she says of the association’s mission. She points to Eleanor Carpenter, the group’s longtime president, as a big part of their success. “Eleanor is out there talking to people, finding out what’s happening on the street and with the merchants … she’s the best president ever.”

In 2012, District 2 Supervisor Mark Farrell presented Carpenter with a certificate signed by the entire Board of Supervisors to honor her hard work, compassion, and dedication, which, he said, “helped small businesses flourish and created new opportunities for others.” Carpenter is the co-owner of Jest Jewels, a popular spot for finding unique accessories that has been headquartered at 1869 Union Street for three decades. The concept proved so successful that Jest Jewels now has a second San Francisco location as well as stores in Berkeley and San Jose. Carpenter’s business partner, Leslie Drapkin, notes that retail in general is flat. “The national retail sales figures which reported down in December just reported a  lackluster January, worse than expected,” she says. “It seems flat sales are everywhere and in every neighborhood. That said, Union Street hasn’t been that slow; in fact, Jest Jewels, Images of the North, Addicted, Lite Bite, and others were up.”

Regarding concerns that the current retail slowdown has affected foot traffic on Union Street, Drapkin says, “At the end of the day, there are only so many dollars to spend and so many ways to spend them. What is clear after talking to many merchants in the neighborhood is that those who really work their stores do the best — those who create the interest with parties, events, active social media, trunk shows, advertising, and mailings clearly do better than those who do not.”

Drapkin also notes that while some businesses are closing, others are moving in. “The shakeouts that have left a few storefronts vacant are either rented or renting out fast with good tenants. Though we will miss Café des Amis, we are getting the wonderful operators of Delarosa in its place. Where La Cucina was, we are getting something equally as good [The S.F. Chronicle reports that new owners Mick Suverkrubbe (Cosmopolitan, Circa), John Jasso (Gary Danko, Fifth Floor), and Claudio Marchesan (E’Angelo) plan to open a pizzeria, salumeria, and wine bar]. Juicy News left Fillmore and just rented on the street, and a new, adorable candy shop just rented a space in the 1800 block. Wrecking Ball Coffee and the new wine store [West Coast Wine & Cheese] are both doing well, as are Equinox and the new Palm restaurant [from the proprietors of the popular Foreign Cinema].” A few of the storefronts remain empty not because there is a lack of interest, Drapkin says, but because of landlords who are asking enormous rents.

Commercial real estate brokers also see the infamous landlords of Union Street as problematic. “The biggest challenge is conveying the wake-up call to an aging and unengaged set of landlords,” says Matthew Holmes, co-founder and principal of Retail West, Inc. He says that rents used to be 10 percent of sales figures but have grown to 15 to 20 percent of sales; some retailers say that ratio needs to decline to 6 or 7 percent for them to be profitable. “Retailers are being bombarded in every direction — minimum wage increases, margin degradation from e-commerce, a timely and costly entitlement process from the city, and a complete lack of involvement from this older landlord community on build-out assistance … this all necessitates more affordable rents.” Holmes believes businesses priced out of streets like Hayes, Chestnut, and Fillmore would be more willing to move to Union with a rent roll back “in the mid $40s per square foot versus the ridiculous $70 to $90 being quoted now.”

Some of the landlords do get it, making Union a desirable alternative to fast-rising rents elsewhere. Juicy News, the newsstand at 2453 Fillmore for nearly 25 years, decided to move to Union Street after their landlords told them to vacate the premises, presumably to get much higher rent from a new tenant.

“I think Union Street is getting stronger,” says Pamela Mendelsohn, senior vice president with the San Francisco office of Colliers International, a global commercial and residential real estate services company. “I’m getting a growing number of calls from people that have interest in the area. The challenge on every street in the city is that like tenants like to group together and follow each other — you have eyewear in Hayes Valley, ready-to-wear on Fillmore, and health and fitness on Union. But I feel like Union is breaking out of that mold. There are some substantial tenants with very different businesses interested in the street.”

Mendelsohn says rents are competitive everywhere in the Northside. “It’s tough for merchants to make it work. It’s nice when you have a landlord who will work with your business, but that doesn’t happen very often. It’s tougher than it’s ever been.” Like Holmes, she points to the increased minimum wage, (which will rise from $11.05 to $12.25 per hour this May) and competition from the Internet as other culprits.

There’s no denying the effect online behemoths such as Amazon.com have had on so-called brick-and-mortar businesses, but a 2014 shopping preferences study by management consulting firm A.T. Kearney Omnichannel brings some good news: Of 2,500 shoppers surveyed from a cross section of demographic and age groups, 90 percent said they would rather shop in-store than online. There’s a simple reason for that according to Mike Moriarty, a partner at A.T. Kearney and co-author of the study: “They love going out, shopping with people, and touching stuff.”

In fact, despite the digital domination doom and gloom that has permeated retail for nearly two decades, 94 percent of total retail sales are still generated at brick-and-mortar stores, according to data from research firm eMarketer.

Mendelsohn echoes that sentiment. “Even when you shop for furniture, you want to touch it and sit in it,” she says. And there are plenty of places to do just that on Union Street, with more to come. “Union is one of the more open-minded streets as far as formula retail, the Union Street Association is one of the best, and it’s a very welcoming neighborhood. Fillmore Street is not welcoming at all. I was in a meeting the other day and someone was cheering getting another coffee shop. Why would you do that? They said, ‘At least it’s not another dress shop.’ Merchants on Union care about what is best for the street long term. I work all over, I see trends before they happen, and I am feeling really good about Union Street.”

Drapkin concurs. “Elea-nor and I truly believe that Union is looking good for the future and will continue to evolve with the best inclusion and mix of restaurants, retail, and service-oriented businesses. Besides, who doesn’t love a street with an Easter Parade and festive balloons on the meters every holiday engaging merchants, neighbors, and tourists successfully?”

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