One of the main anchors of Union Square since 1947, Macy's, is going away in the next couple of years, and without it or anything of that scale to replace it, how long can Union Square remain a shopping destination?

It was very bad news for San Francisco officials and for all Union Square retailers Tuesday when we learned that Macy's plans to sell its 400,000-square-foot store in the next year or two and eventually close the store its had there for nearly 80 years.

This follows Macy's earlier closure of its Stonestown Galleria location in 2018, at a time when the company announced the closure of 100 locations nationwide. And Tuesday announcement came with news of 150 more "underproductive" stores set to close. That will leave Macy's with 200 locations remaining, after the closures occur, along with its Bloomingdale's and Bluemercury stores.

That is a reflection of how poor the state of department-store retail is, especially in urban centers — with experts saying that stores like Macy's have found, for a number of years, their customers have mostly moved to the suburbs, and suburban locations still are doing okay.

"Union Square doesn’t need to exist in the modern framework of local consumer demand,” says Christopher Thornberg, an economist and founder of Beacon Economics, speaking today to the Chronicle. With fewer people traveling to downtown for work, and people finding more of what Macy's sells through online shopping, shopping hubs in downtowns don't work the way they used to.

"This is a Union Square problem. Not a San Francisco problem," Thornberg adds.

Similar discussions happened last summer around the closure of Nordstrom in the SF Centre complex — and today's announcement means that Macy's-owned Bloomingdale's could be the last big-format retailer left in a couple years time, unless the SF Centre receiver finds some retail tenant who wants Nordstrom's former 300,000-square-foot store.

But the blows to the area have only continued, with over two dozen stores closing in the last couple of years including Old Navy's flagship, H&M, Crate & Barrel, The Gap, Barney's, and an Anthropologie location that had lived on Market Street for two decades.

The Union Square Macy's store was rebranded as Macy's in 1947, with the original store that lived on the property being the homegrown department store O'Connor, Moffatt & Co. R.H. Macy & Co. acquired O'Connor Moffatt in 1945, and by September 1949, the company had acquired the adjacent property at 170 O'Farrell Street and opened much of the enormous, multi-level store we know today, with street frontage on Geary, Stockton, and O'Farrell.

Macy's would later acquire the San Francisco-based luxury I. Magnin brand, and I. Magnin's modern building at the corner of Geary and Stockton was incorporated into the complex after the shutdown of the I. Magnin brand in 1995. Combined with the separate Macy's Men's Store building on Stockton Street, opened in 1984, the entire complex clocked in at 1.1 million square feet by the late 90s, making this one of the largest department stores in the country.

The men's store closed in 2016 and menswear was re-absorbed into the main building, with Macy's Co. getting some cash out of the sale of that building. As retail belts continued to be tightened in the last decade, the company also sold the former I. Magnin building to a developer in 2019, even though it remains connected to the original Macy's.

The impending closure of Macy's is going to act as another death knell for the outdoor "mall" that Union Square was. Without anchors that are shoppers' main destination — like Nordstrom and Macy's — smaller specialty stores can start to whither as well. Though, the situation may be helped by the dozens of high-end brands that continue to have a presence around Union Square like they have on Rodeo Drive in Beverly Hills, and in other clusters of luxury retail.

There also, still, are big clothing retailers Saks, Neiman Marcus, and Bloomingdale's — even though Neiman's already filed for bankruptcy in 2020.

"We have to adapt. We have to evolve," says mayoral candidate Daniel Laurie, speaking to the Chronicle today. "We need to get people down [to Union Square] at all times of the day. So you can’t just be thinking about daytime and shopping, but how do we get restaurants and nightlife here and music and concerts down here activating Union Square?"

One thing is certain: People who know the industry aren't shocked about Macy's decision. One retail analyst, Sucharita Kodali, tells the Chronicle that Macy's has a lot to answer for right now to its shareholders — including a 4% dip in its online sales last quarter compared to the same quarter in 2022, which Kodali calls "highly unusual" for any company right now.

"Retailers close stores that aren’t performing and the reason that stores don’t perform can be a multitude of reasons," says Alex Sagues, vice president for retail with brokerage firm CBRE, speaking to the Chronicle. "It’d be impossible not to attribute some of the [problem to] conditions in San Francisco... But that’s certainly not entirely responsible. At the end of the day, the biggest impact on sales is consumer demand. And I think if Macy’s is closing the store, it’s because the store is not performing, which is a reflection of the demand for what they’re selling."

Previously: Macy's to Close Its San Francisco Union Square Flagship, In Huge Blow to City Retail

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