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Take one tech boom, add an anti-chain store law and six-figure payments to vacate existing tenants, insert Sandro, Alexis Bittar, Ella Moss and Aesop, and what do you have? Fillmore Street, aka the hot retail spot in San Francisco.
This story first appeared in the May 19, 2014 issue of WWD. Subscribe Today.
Undeterred by the fact that annual rents have rocketed to between $120 and $144 a square foot, from $72 to $84 a square foot just two years ago, and that the vacancy rate is about one a year, fashion and beauty brands have been clamoring to claim a spot in this affluent Pacific Heights neighborhood. Among those building stores are The Kooples and Rag & Bone. Moreover, Maje and Rebecca Minkoff have set their sights on what realtor David Fishbein describes as “Bleecker Street on the West Coast.”
The 28-year-old partner at Runyon Group should know. In the past three years, his company has settled 13 fashion and beauty brands — including Curve, Alice + Olivia, Joie, Nars Cosmetics, Le Labo and Jarbo — into the quaint buildings built in the early 1900s.
“People see it as a market where a brand can thrive,” Fishbein said.
Previously dotted with art-house theaters, cafés and thrift shops, Fillmore welcomed the contemporary coterie in 2006 with the arrival of Marc by Marc Jacobs. Two years later, Ralph Lauren opened the doors to its emporium. In 2012, the fashion frenzy escalated with new boutiques from Joie, Alice + Olivia and Curve. Fillmore is now home to the likes of James Perse, Oska-owned 2130, Steven Alan, Eileen Fisher, Jurlique and Scotch & Soda.
Some companies are so keen to secure a location on Fillmore that they’re willing to pay non-refundable key money to an existing tenant to hand over the lease. The reasoning is that it is better to pay a business to leave early, even if they have a year left on their lease. According to reports, Ella Moss forked over $250,000 to Design Within Reach for the furniture company’s space, while Rag & Bone paid $25,000 a month for seven months to claim a corner previously occupied by a laundromat and coffee shop for what will be its third West Coast store and 14th full-price store in the U.S. (Ella Moss and Rag & Bone declined to comment.)
Beside key money, fashion retailers must comply with a citywide “formula retail” law that prohibits companies with 11 or more U.S. locations, including signed leases, from entering certain neighborhoods. Fashion houses are feeling extra pressure now that the law — intended to protect independent businesses and keep the neighborhood from becoming cookie-cutter — may be changed to include foreign locations as part of the 11-store count, and to cover seemingly independent brands that are actually half-owned by chains. San Francisco’s board of supervisors is scheduled to review the legislation as early as June.
Exceptions can be made on Fillmore, however. In February, after Rag & Bone partner David Neville flew to San Francisco to speak in front of the city’s Planning Commission, the commissioners voted 4-3 to approve the New York-based brand’s store on Fillmore, exempting it from the formula retail law. In turn, Rag & Bone pledged to support the community through projects such as raising money for public schools.
Still, the San Francisco Bay Area offers few alternatives for fast-growing fashion brands. The moneyed technorati work — but don’t shop — in Silicon Valley. While Union Square doesn’t impose the same restrictions on retail, the home to Paul Smith, Christian Louboutin, Neiman Marcus and other established businesses costs double or triple the rent on Fillmore.
Other areas like Valencia Street in the Mission and Hayes Street in Hayes Valley are even more fervent about opposing chain stores. Across the Bay, Berkeley’s Fourth Street attracts the same brands that operate stores on Fillmore, including Jigsaw London, MAC, Kiehl’s, Erica Tanov and Margaret O’Leary, yet it doesn’t draw the same demographic.
“We looked at a ton of different areas but Fillmore Street felt the most compelling,” said Jonathan Saven, president of VF Corp.-owned Ella Moss, which unveiled a 2,500-square-foot boutique decorated with chevron-patterned mirrors and rose gold-accented furniture in November.
As retailers decorate their shops like apartments, the street’s residential and commercial setting appeals to them.
“The San Francisco Joie girl lives, shops and spends most her time in the area,” said Serge Azria, chief executive officer and creative director of Joie, who opened the contemporary brand’s first Bay Area boutique in 2012. “Fillmore Street lends itself to this intimate feel.”