Starbucks (SBUX) and several other major companies are reassessing their presence in San Francisco, leading to the closure of stores. As of October 22, Starbucks plans to shut down seven stores in the city, leaving 52 remaining locations. The company has not provided specific reasons for these closures, but it appears to be part of an effort to maintain a healthy store portfolio.

Starbucks is not the only large consumer-facing company to make such decisions in San Francisco this year. Amazon (AMZN) closed a Whole Foods Market just 13 months after opening it and also shut down all four Amazon Go Stores in March. Office Depot (ODP) closed one of its stores in April, while Anthropologie (URBN) departed from Union Square after two decades in May. Gap (GPS) closed Old Navy, Banana Republic, and Athleta stores, and Nordstrom (JWN) closed its flagship store in August, followed by Saks Off 5th shutting its doors.

Starbucks to Close Seven Stores in San Francisco

The Starbucks stores slated for closure are located at Mission and Main, Geary and Taylor, 425 Battery, 398 Market, 4th and Market, 555 California, and Bush and Van Ness. Notably, none of these stores are unionized, and employees will have the opportunity to transfer to other locations.

Remote Work and Declining Office Visits Impacting San Francisco Retail:

 

Declining Office Visits and Remote Work Affect San Francisco Retail

One of the key reasons behind this trend is the rise of remote and hybrid work models, resulting in fewer office workers commuting to the city. San Francisco has seen the lowest number of office visits among major US cities, with a 52.7% decrease in office visits compared to August 2019 before the pandemic.

 

Another contributing factor is migration patterns, with people moving out of the city, which has led to fewer retail visits and affected companies’ real estate decisions. Starbucks CEO Laxman Narasimhan remains optimistic about growth opportunities in underpenetrated areas in the US.

Tech Industry and AI Boom Could Rejuvenate San Francisco:

 

Tech Industry’s Growth and AI Boom Could Revive San Francisco’s Retail Landscape

However, the recent surge in artificial intelligence (AI) activities in the tech industry might rekindle San Francisco’s retail scene. Tech companies are beginning to show interest in expanding and upgrading office spaces for their employees, potentially driving more people back to the office.

 

Crime and Safety Concerns Play a Role in Retail Store Closures:

 

Safety Concerns Contribute to Store Closures in San Francisco

Safety concerns and rising crime rates have also played a role in companies’ decisions to close stores. Retail theft and organized retail crime have posed threats to employees and guests, affecting business performance. Target, for instance, announced the closure of nine stores in San Francisco and Oakland due to crime-related issues.

 

Minimum Wage Law Looms as a Potential Factor:

 

Minimum Wage Law Impact on Retail Store Closures

Additionally, the impending minimum wage law in California, set to take effect on April 1 and raise starting pay for fast food workers to $20 an hour, could influence future decisions for businesses in the state.

Despite these challenges, San Francisco Mayor London Breed remains hopeful about the city’s future, emphasizing that people still want to establish businesses there, contributing to its ongoing growth.