Downtown San Francisco has turned into a “No-Go Zone” for many people, including HHS employees. Many businesses have fled as homelessness and crime spurred on by rampant drug addiction have turned the area into what could be compared to a zombie apocalypse setting. Now, IKEA is planning to put a new location there. Can it work? Trefor Moss reports in The Wall Street Journal:
The San Francisco store is focused on “small-space living,” said Akalin, the store manager, meaning products such as lighting, kitchenware and storage units are given priority. There is no furniture warehouse where customers can buy flat-pack bed frames or bookshelves on-site, though furniture will still be on display and can be ordered for delivery. The traditional IKEA restaurant will be condensed into a “Swedish deli” where customers can order meatballs and other IKEA staples on touch screens.
The model has had its teething troubles, however. IKEA closed early examples of the format in Madrid, Shanghai and Warsaw, and shut its first U.S. downtown store, in the New York borough of Queens, in December, less than two years after it opened.
IKEA said visitor numbers in Queens hadn’t met its expectations. One lesson the company has learned, Akalin said, is that the downtown format works best when the company owns the building, as it does in San Francisco, and can remodel the interior to meet its specific needs.
The company has a particular interest in drawing shoppers back to downtown San Francisco.
Ingka, the company that operates most IKEA stores, has been branching into real estate and now owns 51 malls globally, including the one in San Francisco. Many of its malls are anchored by IKEA stores.
Completed in 2016, the former 6X6 mall—Ingka has yet to announce its new name—previously stood empty for seven years after failing to attract a single tenant.
Ingka will occupy three of the mall’s six levels with the IKEA store and a planned co-working space, and plans to attract retail, office and restaurant tenants to fill the remaining three and make the whole project viable.
Ingka acquired the building in 2020, saying it would spend $260 million buying and converting the property. Since then, downtown San Francisco’s plight has worsened.
Thousands of workers who left town during the pandemic never returned. Local tech companies including Salesforce and X Corp., the renamed Twitter, have slashed head count, while retailers such as Nordstrom and Banana Republic, deterred by dwindling footfall, have decided to leave or downsize, raising concerns the area could enter a so-called “doom loop.”
IKEA already operates two full-size locations in the Bay Area and knows from customer data gathered at its Emeryville store—which Akalin also manages—that many people travel from downtown San Francisco to shop there. Now they’ll have an alternative on their doorstep, he said.
Though crime has driven away other retailers, Akalin said he was confident the store’s security team would make it safe for customers and employees. The store has security arrangements similar to other IKEA locations, he said.
IKEA’s arrival could encourage more businesses to commit to the area and support City Hall’s efforts to revive the downtown area by boosting footfall and tax revenue, said a spokeswoman for San Francisco Mayor London Breed. “Our hope is that a store of this size and popularity will become an anchor in the community,” she said. The city didn’t provide incentives to IKEA but did help the retailer recruit local staff.
Read more here.
