Move FM Global News

SAN FRANCISCO, California: Due to declining sales, occupancy and foot traffic, Unibail-Rodamco-Westfield decided to transfer its Westfield San Francisco shopping mall to lenders after operating the site for 20 years.

Last week, Park Hotels & Resorts also announced that it stopped making payments on a $725 million mortgage for its Hilton San Francisco Union Square and Parc 55 hotels.

Westfield’s move is the latest blow to San Francisco, the former tech hub that has been hard hit by the COVID-19 pandemic, where office buildings remain empty due to more people working from home and the layoffs made by major tech companies.

The decline in business, coupled with a rising US interest rate environment, has made it costlier for companies to refinance their outstanding debt on these buildings, prompting loan payment cancellations or transfers of the properties back to lenders.

The potential for commercial real estate issues to affect banks is also becoming a larger concern for investors and regulators.

“Westfield’s move shows they see risk in the city losing critical mass and is in anticipation of a long period of suffering for downtown San Francisco,” said Thomas LaSalvia, Moody’s Analytics Head of Commercial Real Estate Economics, as quoted by Reuters.

“We agree there is trouble ahead, but are more optimistic that after a couple of years, occupancy rates and foot traffic will bounce back in a city that is a cultural destination and still has critical mass in high skilled labor working in the life sciences, biotech and tech sector,” he added.

Meanwhile, real estate investor Warren Wachsberger, CEO of Aecom Capital, said mall owners, such as Unibail-Rodamco-Westfield, are instead focusing on their healthiest properties.

“The best malls are still doing well,” Wachsberger said, according to Reuters.