S.F.’s Japantown looks to 2024, with members expressing concerns

San Francisco’s Japantown photo by Tomo Hirai/Nichi Bei News

Some feel San Francisco’s Japantown is on the up and up. Since the beginning of the pandemic, the ethnic enclave fared marginally better than many San Francisco neighborhoods. According to a July, 2023 report from the San Francisco Chronicle, the Japantown neighborhood ranked second among three San Francisco neighborhoods showing more sales tax revenue compared to before the beginning of the pandemic while the rest of the city, on average, saw a 25% decline.

That vitality, however, does not preclude Japantown from potential economic woes as community members express caution in the new year

Business Slows
Relative to San Francisco’s downtown where retail closures have left the area deserted, Japantown has fared far better, with most vacant storefronts in the neighborhood filled since the start of the pandemic.

“We are in the worst of the worst times right now. This is my third bad cycle — 2008 was horrendous, the dot com was horrendous, but this is a whole different level and Japan Center is doing really well,” Santino DeRose, managing broker and partner at Maven Commercial, said. Maven, which has handled leasing for 3D Investments’ Japan Center East and West Malls since 2019, discussed their leasing practices with the Japan Center Ad Hoc Committee of the Japantown Task Force Oct. 16, 2023.

Today, the only non-leased spaces in the Japan Center are the former Takara Restaurant space in the East Mall, as well as the former Mifune Bistro space in the Kinokuniya Building. Although some spaces remain empty, most have tenants working through city processes to open new businesses, such as an izakaya in the former Tan Tan cafe space and a new beauty store setting up in the former Auto Freak/Talk Freak location.
Merchants, however, have expressed some apprehension.

“I noticed in August, … things started declining a little bit. I noticed a difference. And I know August is the time people start going back to school, but then European tourists move in,” Stephen Jordan, owner of Sakura Sakura, told the Nichi Bei News. “September, I noticed a strict decline, October, November.”

According to Jordan, this past December was one of the quietest he has had, he said in early December. Neighboring merchants shared these sentiments. Amid the downturn, a bigger concern from construction impacts loom on the horizon for Japantown merchants.

Breaking Ground at the Peace Plaza
Following a five-year public process the Japantown Peace Plaza renovation project is about to break ground. The long-awaited redo of the plaza between the East and West Malls is slated to start after this year’s Northern California Cherry Blossom Festival. The 18-month process is likely to impact foot-traffic to the indoor malls, even as the project leaders promise to carry out the project piecemeal to preserve access for the malls throughout construction.

“I think the main concern I have with the project is to make sure the planning department really assists and make sure that there’s some kind of wayfinding for folks to navigate once they come to Japantown. That’s really going to be important. And what ways can the city help to make sure that they let people know Japantown is still open?” Grace Horikiri, executive director of the Japantown Commercial Benefit District, told the Nichi Bei News.

“Once the news goes out, ‘Peace Plaza under construction,’ it gives a big picture, like, ‘You mean J-Town is closed?’”

Meanwhile, the Japantown Task Force’s Peace Plaza Committee has helped spearhead the project’s design process with the San Francisco Recreation and Parks Department. The project is an estimated $33 million renovation effort to fix leaks to the city-owned parking garage located beneath the plaza. The project also entails redoing the plaza to reflect community needs. While the committee had been a forum to discuss the re-design of the Peace Plaza over the past five years, with the project moving into its construction phase, Jon Osaki, co-chair of the committee, said he hopes they will become a forum for the community to navigate the construction impacts.

“I know there were some side conversations happening, … so what we had asked folks to do was to bring those concerns here, to this meeting,” Osaki said during the Nov. 28 Peace Plaza Committee meeting. “So then everyone could hear them, we could all be aware of what different concerns that folks have and we can see what can be done to best approach them.”

Emily Murase, executive director of the Japantown Task Force said, while the city did not budget any funds to mitigate construction impacts beyond the bare minimum, she is seeking to fund artistic wraps, plywood board guides and an ambassador to help visitors navigate around the construction. Osaki suggested that, while the city might not fund the mitigation measures, he hopes that property owners who stand to benefit from the renovated plaza will also help their tenants suffering the construction impacts pay for mitigations. Murase reported that the Japan Center Malls has pledged to contribute to the fund.

Merchants, meanwhile, have shown a mixed level of understanding of the project and its potential impacts. Jordan said he was worried about the impact to foot traffic to his store located near the Mall entrance going out into the plaza and had attended a few meetings to learn about the project, though he missed the most recent meetings. Other merchants said they were aware of the project, primarily through Horikiri’s newsletters from the JCBD, but have not read up on the topic enough to know what kind of impact they should expect.

“Honestly, I haven’t even read up on it to tell you the truth,” Sachiko Gee, owner of Cha-to in the Kinokuniya Building, said. “Grace, she’s really good about sending stuff out and keeping us informed about everything, but I think it’s on us to actually read up on it, and I just haven’t had time.”

Murase meanwhile said on a separate matter, that her organization’s staff typically must visit merchants two to three times to meet with managers to talk about issues her organization is working on and visit five to six times if they want to conduct a survey, indicating the difficulty in keeping the merchant community informed and engaged in larger Japantown issues.

Osaka Way on the Horizon
And while the Peace Plaza project aims to break ground, the Japantown Osaka Way/Buchanan Mall Improvements Project is also raising concerns on the pedestrian mall located across the street from the plaza. While the Osaka Way project is still in its design phase, merchants along the corridor have expressed worries over construction impacts as the project aims to break ground in 2025, potentially overlapping with the tail-end of the Peace Plaza renovation as well.

“Construction, it literally discourage(s) people from coming. Number one, they don’t want to hear the noise, they don’t want to see construction. A lot of places here to eat, they’re worried about dust,” Jeannie Kim, co-owner of recently opened Fermentation Lab told the Nichi Bei News. Kim said she was concerned for the businesses along the mall as the project would tear out the existing pavement, cutting off access to many businesses.

Kim, who also owns and operates two restaurants on Market Street, said she has experienced several construction-related downturns over the past two years where she estimated a loss of around 40% of her business. She anticipates a 30% drop in business at her Japantown location.

While the dust and the appearance of construction can turn away would-be customers, Kim said construction also disturbs San Francisco’s wildlife that lives underground and warned pest mitigation will also be necessary as well.

To help deal with the potential downturn in business, Horikiri said she hopes to apply to a new request for proposal dedicated to construction mitigation for projects. While the JCBD likely cannot claim all $350,000 of the city-wide pot, she hopes anything the city might spare could help the merchants through the construction period. Horikiri said the money they receive will likely go toward mini-grants for merchants since other tactics, such as an outdoor concert or other efforts to attract people to the area will not work as well when construction has torn out the sidewalk.

“And let’s say we get $50,000, $5,000 each, it really isn’t much, but it’s better than nothing,” Horikiri said.

Above all, Horikiri said communication will be key as construction efforts ramp up for both projects.

“(One merchant) didn’t realize the Peace Plaza renovation was going to happen. So that was like a red flag. … So it’s going to be through our e-newsletter that we really give them a little bit more detailed information, making sure that the planning committee for both projects have things available not only in English, but Japanese, Korean, Chinese, so that they fully understand,” Horikiri said. “I think I really need them to fully understand the scope of the work and how long this is going to take.”

Under Maven a number of tenants have moved into the Japan Center Malls since 2019. Most opened after the start of the pandemic. While Japantown community members raised their concerns to Maven during the Oct. 16 meeting, DeRose noted that his firm has worked to find the best fits for the malls. Under Maven, the Japan Center Malls has also leased spaces to the San Francisco Go Club, the JTF’s own Japantown Visitors Center, Japanese-owned and Texas-based game arcade operator Kiddleton, and vintage clothing event organizer OK Marketplace whose owner is part-Japanese.

Additionally, the mall leased spaces to beverage shops Yi Fang, Pink Pink and Screen Savor, as well as makeup and fashion accessory businesses Fanloli and iFun. As of press time, the malls have also leased a space to Angel Beauty, a makeup store, and an as-of-yet unannounced beverage business run by the manager of Pink Pink.

Glynis Nakahara, chair of the land use committee, told the Nichi Bei News that Maven has leased to tenants who break from “conventional commercial leases, such as the go club and JTF’s visitors center. However, she also noted there is room to improve. She said incoming businesses should have Japanese signage to reinforce the Japanese character of the malls and to follow a covenant agreement 3D Properties is under that requires they maintain a Japanese theme in the malls. She also hopes the community can work more closely with Maven and 3D in the future to identify and attract more authentic and unique Japanese businesses.

Nakahara separately recognized the neighboring Kinokuniya Building for leasing to Yakitori Edomasa, a century-old Japanese chicken skewers restaurant from Tokyo, which opened last October.

Part of the call for more Japanese-oriented businesses came as the San Francisco Standard called Stonestown Galleria, a mall in the Southwest corner of San Francisco, the city’s “second Japantown,” highlighting the high concentration of Japanese brands at the mall including Uniqlo and Uncle Tetsu’s Cheesecakes. Ad Hoc committee members, including committee chair Lori Yamauchi, asked what it would take for Maven to attract more Japanese businesses to Japantown, but DeRose and Klein noted that there were considerable similarities between the two malls, including some shared tenants such as Daiso. And while there are some businesses unique to Stonestown, DeRose noted there are comparable tenants located in Japantown as well, including businesses similar to Kura Revolving Sushi Bar, such as Izumi Kaiten Sushi.

Formula Retail Rules Change?
Nakahara meanwhile also asked if formula retail restrictions in Japantown made it difficult to attract would-be Japanese tenants to the malls. Her committee, in 2020, briefly entertained a possible rule change proposed by the city of San Francisco which would exempt businesses located in Japan from a total store-count used to determine whether a business is formula retail or not.

Currently, San Francisco’s Japantown conditionally allows formula retail within the Japantown Neighborhood Commercial District if businesses undergo a conditional-use authorization process with the city. The city determines whether a business is formula use or not by counting how many businesses an entity operates. If a business has 11 locations or more anywhere in the world, it is considered “formula retail,” but the tabled proposal suggested a rule-change to exempt locations in Japan when determining whether a potential tenant is formula retail or not. While major Japanese international chains such as Uniqlo will still be counted as formula retail, the rule change could exempt Japanese chains that have yet to become international brands.

DeRose said he could not speak to any specific instances where the rule change could have helped, but pointed out the conditional use process adds eight months to a year to a tenant’s timeline, as well as tens of thousands of dollars in additional costs. He added that since San Francisco’s Proposition G passed in 2007, mandating the 11-store rule, 304 conditional use applications have been filed and only 17 have been denied since. He added that all applications his firm has filed since the start of 2020 have been approved. Within Japantown, Kiddleton underwent the process to open in the West Mall and is going through the process again to open a second location in the Kinokuniya Building. Meanwhile, DeRose also noted a proposal to replace the Burger King with Super Duper Burgers on the corner of Post and Fillmore Streets is going through the application process with no contest, but will still have to wait out the eight month process with the city.

“We’re going through this big song and dance on formula retail when everyone gets approved anyway,” he said, noting that potential tenants can instead choose a different location, without spending an extra eight to nine months to get conditional use approval.

Similarly, Murase reported Dec. 7 at the Land Use meeting that she met with representatives from the Kinokuniya Bookstores of America, owners of the Kinokuniya Building.

“They have companies banging at their door that want to go overseas … absolutely, the conditional use authorization is a major stumbling block. They hear about that and they run in the other direction,” Murase said. “There are many Japanese formula retail that are looking to Kinokuniya to introduce them to potential spaces, places to go to. … They were strongly in favor of this (rule change).”

Meanwhile, in an earlier Nov. 9 meeting, Karen Kai, a land use committee member, expressed concern with the rule change and what impact it would have on merchants.

“I have some concern about just opening things wide-up, even if it’s limited to Japanese businesses. Because the reason there is formula retail limitations citywide is because of the impact its had on multiple businesses,” she said. The rules have, in the past, kept Starbucks from opening a store in Japantown, but did not trigger in 2009 for Daiso because of a loophole in the Proposition G language that initially only counted locations in the U.S.

The loophole came to light in 2012 when Daiso underwent a conditional use approval process for a store expansion. Ichiban Kan, a neighboring competitor, complained they had lost business since the rival chain first opened. Ichiban Kan shuttered in 2020 just before the pandemic.
While the committee revisits the proposal, Yamauchi stressed merchants should guide the discussion on the proposal.

“JTF should be neutral on this issue and we should not push a particular position on this with the merchants, but just try and lay out what are the issues, what are the pros and cons of formula retail and Japantown, and if there is a desire to attract more Japan-based formula retail, how would the zoning need to change?” Yamauchi said Dec. 7.

Moving into the new year, the land use committee hoped to refine a letter and survey to send to Japantown merchants to inform and discuss the proposed rule changes.

Regardless of what 2024 brings, Japantown’s merchant community hopes for a successful new year with some adapting with the needs of the community. After three months in business, Kim said she expanded her hours at Fermentation Lab, after hearing from Japantown community members the neighborhood needed a place for breakfast. Now open from 8 a.m. to 2 p.m., she hopes to fill a niche that was once filled by Cafe Mums which permanently shuttered in April of last year.

“I think we’ve been very welcomed by the community. So we’re very grateful and wanted to make sure we provide what the community needs here in Japantown, so we decided to open in the morning,” Kim said. “We’ll just see how things go.”

Horikiri, meanwhile, continues to work on attracting visitors to Japantown.

“Somehow a lot of travel agencies and travel writers have been contacting us. So we met with six German travel writers last month. We also met with a French travel writer, and then someone from Canada. … So it shows me that Japantown is on the map,” she said. “And I think it’s going to take more of that, that when we go to different events, really represent J-Town. I think that’s what I really want our Japantown to do, is be more visible, in city events, in anything, because it just can’t be one organization. It can’t just be one person. It has to be all of us to make sure that we keep Japantown thriving.”

Attracting Culturally Relevant Merchants
Beyond the construction impacts and potential effects of a slowing economy, some community leaders also expressed concern over the diversity of Japantown’s merchant community. Discussions at the Ad Hoc Committee, as well as the Land Use/Transportation Committee of the Japantown Task Force have highlighted concerns over the abundance of “boba drink shops” and “trinket” stores in the Japan Center Malls. In the West Mall building-alone, patrons can get a boba milk tea from four businesses. Meanwhile, others maligned cheap fashion shops such as So Cute Boutique, a store selling fashion accessories for younger women, which moved in shortly after Daikoku By Shiki, a store specializing in authentic Japanese ceramics, closed after 28 years in business due to rent costs. So Cute, managed by the same owner of neighboring Yumi Boutique, which sells similar products, secured a lease directly with 3D Properties without going through Maven, according to Haley Klein, a partner at Maven.

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