Neighborhood Businesses

"San Francisco has always gone through boom and busts. To help be a part of the revitalization is something I’m really excited to do. And it means that as the city is on its way up again, my business will be positioned well—instead of trying to get on the wave."

—Victor Gonzalez, Owner of new Jackson Square art gallery and event space GCS

"Somewhere in San Francisco" by Thomas Hawk is licensed under CC BY-NC 2.0

Neighborhood businesses are a big part of what makes living in this city special. The character of a neighborhood, along with what sociologists refer to as “weak ties” that knit together the fabric of community, flourishes at cafes and laundromats, in boutiques and bookstores, and at the local hardware store or corner store. Downtown and throughout the city, independent merchants contribute to the cultural and ethnic diversity we cherish, while employing 360,000 people, paying taxes, and keeping more of our dollars in the local economy.

Although the total number of businesses in the city has rebounded past the 2019 benchmark, revenues have not. With fewer than half the number of office workers compared to pre-pandemic levels, as well as a decline in tourists and convention travelers, the Financial District, SoMa, and Union Square have seen major downturns in the number of small businesses as well as total sales. Union Square retail vacancies hit 20.6% in the first quarter of 2024—with a ground-floor vacancy rate approaching 40%—driven by, and further contributing to, a 9% drop in the number of visitors compared to one year prior.

Source: SF.gov

Yet, by the end of 2023, it was the Tenderloin that had seen the steepest four-year decline in sales tax revenues—falling to less than half when adjusted for inflation—and only five neighborhoods had climbed back to 2019 levels. Citywide retail vacancies broke an all-time record in Q1 2024, hitting 7.9%. Local officials have identified the Mission, Western Addition, Bayview Hunters Point, Tenderloin, and the entire southern edge of the city, from Visitacion Valley to Parkmerced, as priority areas “to support culturally significant enterprise, arts, services, or businesses.”

Beyond a lack of foot traffic, small businesses in San Francisco must overcome well-document hurdles, including red tape, labor shortages, supply chain disruptions, and high rents. Many of these issues will require government intervention, and we’ve begun to see policy initiatives and stimulus efforts that promise to streamline processes, eliminate fees for start-ups, subsidize first-year rents, and increase safety in commercial corridors.

Learn more about the hurdles small business owners face in Battery Powered's 2021 issue brief on the Bay Area's Future.

Meanwhile, merchant and community groups are investing in efforts to boost traffic to neighborhood businesses. As these efforts gain momentum, the expectation is that thriving independent businesses will not only rejuvenate the economy, but lead to healthier and more vibrant neighborhoods.

Source: SF.gov