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  • State of the Retail Sector: Challenges

    and Opportunities for San Francisco’s

    Neighborhood Commercial Districts

    Final Report

    February 15, 2018

    prepared for:

    San Francisco Office of Economic and Workforce

    Development

  • February 2018 2

    TABLE OF CONTENTS

    TABLE OF FIGURES ................................................................................................................ 3

    INTRODUCTION ....................................................................................................................... 4

    ISSUE BRIEF #1: RESTRUCTURING OF THE RETAIL, RESTAURANT, AND PERSONAL SERVICES INDUSTRIES .......................................................................................................... 6

    Issue Brief Summary ........................................................................................................................ 7

    National Trends and Impacts on The NCDs .................................................................................... 9

    ISSUE BRIEF #2: WHAT CONSTITUTES A SUCCESSFUL SAN FRANCISCO NEIGHBORHOOD COMMERCIAL DISTRICT? .......................................................................29

    Issue Brief Summary ...................................................................................................................... 30

    Measuring Success ........................................................................................................................ 32

    Factors That Support Success ....................................................................................................... 37

    ISSUE BRIEF #3: COSTS AND CHALLENGES FOR RETAIL, RESTAURANTS, AND PERSONAL SERVICES IN SAN FRANCISCO’S NEIGHBORHOOD COMMERCIAL DISTRICTS ...............................................................................................................................57

    Issue Brief Summary ...................................................................................................................... 58

    San Francisco’s Competitive Advantages for Retail, Restaurants, and Personal Services .......... 59

    Costs and Challenges for Retail, Restaurants, and Personal Services in San Francisco’s NCDs 60

    Business Adaptations ..................................................................................................................... 70

    APPENDIX: INTERVIEWEES AND BIBLIOGRAPHY ..............................................................72

    List of Interviewees ........................................................................................................................ 73

    Bibliography ................................................................................................................................... 74

    file://///DC1/Strategic/Current%20Projects/1707%20SF%20Commercial%20Corridor%20Study/Deliverables/Issue%20Briefs%20Combined%20-%20Final%20Report/FINAL%20REPORT/SF%20NCDs%20Final%20Report%2002152018_ZoteroLinks.docx%23_Toc506454493 file://///DC1/Strategic/Current%20Projects/1707%20SF%20Commercial%20Corridor%20Study/Deliverables/Issue%20Briefs%20Combined%20-%20Final%20Report/FINAL%20REPORT/SF%20NCDs%20Final%20Report%2002152018_ZoteroLinks.docx%23_Toc506454493 file://///DC1/Strategic/Current%20Projects/1707%20SF%20Commercial%20Corridor%20Study/Deliverables/Issue%20Briefs%20Combined%20-%20Final%20Report/FINAL%20REPORT/SF%20NCDs%20Final%20Report%2002152018_ZoteroLinks.docx%23_Toc506454496 file://///DC1/Strategic/Current%20Projects/1707%20SF%20Commercial%20Corridor%20Study/Deliverables/Issue%20Briefs%20Combined%20-%20Final%20Report/FINAL%20REPORT/SF%20NCDs%20Final%20Report%2002152018_ZoteroLinks.docx%23_Toc506454496 file://///DC1/Strategic/Current%20Projects/1707%20SF%20Commercial%20Corridor%20Study/Deliverables/Issue%20Briefs%20Combined%20-%20Final%20Report/FINAL%20REPORT/SF%20NCDs%20Final%20Report%2002152018_ZoteroLinks.docx%23_Toc506454500 file://///DC1/Strategic/Current%20Projects/1707%20SF%20Commercial%20Corridor%20Study/Deliverables/Issue%20Briefs%20Combined%20-%20Final%20Report/FINAL%20REPORT/SF%20NCDs%20Final%20Report%2002152018_ZoteroLinks.docx%23_Toc506454500 file://///DC1/Strategic/Current%20Projects/1707%20SF%20Commercial%20Corridor%20Study/Deliverables/Issue%20Briefs%20Combined%20-%20Final%20Report/FINAL%20REPORT/SF%20NCDs%20Final%20Report%2002152018_ZoteroLinks.docx%23_Toc506454500 file://///DC1/Strategic/Current%20Projects/1707%20SF%20Commercial%20Corridor%20Study/Deliverables/Issue%20Briefs%20Combined%20-%20Final%20Report/FINAL%20REPORT/SF%20NCDs%20Final%20Report%2002152018_ZoteroLinks.docx%23_Toc506454505

  • February 2018 3

    TABLE OF FIGURES

    Figure 1. Estimated Annual Sales of U.S. Retail and Food Services Firms: 2000-2016 .............................. 9

    Figure 2. Estimated Annual Sales of U.S. Retail Firms by Type of Business: 2000-2016 ......................... 10

    Figure 3. Annual Sales Tax Revenues from San Francisco Retail and Food Services Firms, 2007-2016 12

    Figure 4. Annual Sales Tax Revenues from San Francisco Retail and Food Services Firms by Category, 2007-2016 ................................................................................................................................................... 12

    Figure 5. National Announced Net Store Openings for Selected Retail Categories, Q1 to Q3 2017 (Announced Openings Minus Announced Closures) .................................................................................. 13

    Figure 6: E-Commerce as a Percent of Revenue by Retail Category ........................................................ 16

    Figure 7: Total Retail Employment in San Francisco, Alameda, San Mateo, and Santa Clara Counties, 2004-2015 ................................................................................................................................................... 28

    Figure 8: Electronic Shopping* Employment in San Francisco, Alameda, San Mateo, and Santa Clara Counties, 2009-2015 ................................................................................................................................... 28

    Figure 9. Average Annual Sales Tax Revenue per Establishment: Five Case Study NCDs and the Citywide Average, 2007-2016 (Not Adjusted for Inflation) ........................................................................................ 36

    Figure 10. Vacant Storefronts as a Percent of Total Storefronts, 2016/2017 ............................................. 36

    Figure 11. Summary of Factors Supporting Success of San Francisco Neighborhood Commercial Districts .................................................................................................................................................................... 37

    Figure 12. Business Mix in Case Study NCDs, 2017* ................................................................................ 44

    Figure 13. Unemployment Rate in the City of San Francisco, 1990-2017 (May of Each Year) ................. 61

    Figure 14. San Francisco Labor Laws, 2017 .............................................................................................. 64

    file://///dc1/Strategic/Current%20Projects/1707%20SF%20Commercial%20Corridor%20Study/Deliverables/Issue%20Briefs%20Combined%20-%20Final%20Report/Revised%20Report/SF%20NCDs%20Final%20Report%2001052017_ZoteroLinks.docx%23_Toc505605515 file://///dc1/Strategic/Current%20Projects/1707%20SF%20Commercial%20Corridor%20Study/Deliverables/Issue%20Briefs%20Combined%20-%20Final%20Report/Revised%20Report/SF%20NCDs%20Final%20Report%2001052017_ZoteroLinks.docx%23_Toc505605515 file://///dc1/Strategic/Current%20Projects/1707%20SF%20Commercial%20Corridor%20Study/Deliverables/Issue%20Briefs%20Combined%20-%20Final%20Report/Revised%20Report/SF%20NCDs%20Final%20Report%2001052017_ZoteroLinks.docx%23_Toc505605516 file://///dc1/Strategic/Current%20Projects/1707%20SF%20Commercial%20Corridor%20Study/Deliverables/Issue%20Briefs%20Combined%20-%20Final%20Report/Revised%20Report/SF%20NCDs%20Final%20Report%2001052017_ZoteroLinks.docx%23_Toc505605518

  • February 2018 4

    INTRODUCTION

    The San Francisco Office of Economic and Workforce Development (OEWD) contracted Strategic

    Economics to provide a series of issue briefs about the trends affecting the City’s Neighborhood

    Commercial Districts (NCDs). NCDs include most of the City’s neighborhood retail, outside of Downtown,

    mid-Market, the northeastern waterfront, and Stonestown Galleria.1 This report is intended to provide

    background information and analysis on changing industry trends and other conditions affecting the NCDs

    that City agencies may use in exploring policy changes, programs, and other strategies to help the NCDs

    adapt to changing conditions.

    This report includes issue briefs on the following three topics:

    1. The national restructuring of the retail, restaurant, and personal services industries.

    2. Factors required to support successful San Francisco retail districts.

    3. Opportunities, costs, and challenges for retail, restaurant, and personal services businesses in San Francisco, and the adaptations that businesses are making in response to changing conditions.

    An executive summary for this report is available for download on OEWD’s website. The executive

    summary provides an overview of key findings from the report, as well as cross-cutting conclusions and

    implications for the NCDs drawn from the three

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