SAN FRANCISCO — A blighted San Francisco neighborhood adjacent to the fashion retail-rich Union Square downtown is poised for gentrification as a value-based retail and cultural district, starting with a 256,000-square-foot mall, CityPlace, set to begin construction this summer.

This story first appeared in the April 26, 2011 issue of WWD. Subscribe Today.

The mid-Market Street neighborhood between Fifth and Ninth streets used to be the theater district, where a couple of early 20th century playhouses, which for decades have been neighbors to shuddered businesses and porn houses, still operate.

Last week, the micro-blogging company Twitter signed an agreement to locate in a vacant merchandise mart along the stretch, drawing attention to progress in the neighborhood started in 2004 when Urban Realty, developers of CityPlace, began buying some of the distressed properties.

Aside from the mall, there are plans to attract more value-driven retail and fashion to the neighborhood, in addition to a new performing arts center, as well as ateliers and boutiques for local designers. There also are plans for multiple housing projects.

“We kind of started all this revitalization.…When we told people what we had acquired, their jaws dropped,” said Dave Rhoades, principal of Urban Realty, estimating how rents in the neighborhood are 30 to 40 percent less than just a couple blocks away in Union Square.

Letters of intent from several retailers for the five floors of CityPlace, with spaces 25,000-90,000 square feet, have been signed, but not announced. The mall, with a rising atrium, escalators and elevators in the common space, is just a couple of doors from the edge of Union Square and the San Francisco Centre Mall, where Nordstrom is the anchor. There is a two-floor underground parking garage and loading docks, which in San Francisco are difficult to find for retailers.

Likewise, the larger CityPlace retail spaces are in contrast to the more typical 8,000-square-foot spaces available in and near the city’s downtown, well known among tenants for its quirky building layouts.

CityPlace also will bring retail to a neighborhood starved of places to shop. “The mix should be such that (the mall) has its own identity and cross-shopping experience so you’ll go there for multiple reasons,” said Vikki Johnson, real estate broker for CityPlace. “This is your neighborhood basic shopping center.”

Of note, retailers locating at CityPlace — by being outside a special tax-break boundary targeting the mid-Market renaissance — won’t be able to avail themselves of a six-year reprieve from paying city payroll taxes, which sweetened the deal for Twitter to locate in the neighborhood and will be available to retail sites in the neighborhood.

However, city officials earlier granted CityPlace perhaps a more lucrative break for its tenants occupying spaces under 90,000 square feet: they don’t have to apply for a conditional use, a lengthy process particularly for retail chains. “You’re already preapproved,” Rhoades said.

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