In the age of COVID-19, it’s completely unclear when normal life will resume—and what “normal” will even be when it does. But that’s not stopping Ingka Group, the parent company of Ikea, from expanding, and doubling down on brick-and-mortar stores.
Ingka’s Centres division just announced that it will spend $260 million to open a mall in downtown San Francisco in the fall of 2021. (And yes, the mall will have an Ikea inside to boost the commercial appeal of its property to, in turn, lease space to other companies; aside from its $35 billion furniture business, real estate is Ingka’s global business plan in a nutshell.) But beyond the Ikea store, Ingka has a lot more planned for the space. “It will eventually serve as a mixed-use ‘meeting place’ that could include retail, residential, hotel, flexible working spaces, [food and beverage], community services, etc.,” an Ingka Centres spokesperson writes. “We will work with San Franciscans to develop the space based on their wants and needs.”
Technically, the new mall is an old one. San Francisco residents will recognize the six-floor “6×6” development at 945 Market Street, a 250,000-square-foot building completed in 2016, only to remain dormant since, save for a successful parking garage in the basement. “Far from the tech-fueled money tree that developers hoped it would be, 6×6 has come to represent something of a canary in the coal mine for S.F. real estate,” wrote real estate publication Curbed in a profile on the location in July.
For Ingka, however, it’s part of a $8.6 billion investment in the future of the company that was first announced in 2018, which includes building Ikea stores, not only in remote suburban locations, but in major cities themselves—including future stores in the heart of Chicago, New York, and Los Angeles. We saw an early taste of such an initiative in 2019, as Ikea opened a small store in Manhattan (technically, that was an Ikea project, though, not an Ingka Centres initiative). Physical retail stores are still important to Ikea as a way to experience its products, especially as it struggles to scale its e-commerce platform.
It might seem strange that Ingka is investing in expansion now, as the pandemic has undoubtedly impacted retail brands across the board, though we can’t know to what extent since the private group shares revenue on a yearly rather than quarterly basis.
“We of course understand the recent pandemic has had an impact on all cities and retail environments, but we are confident in our future,” a spokesperson writes. “Our strategy is to be close to where many people live and work, and we believe in the long-term potential for 6×6.”
That sentiment echoes what we’ve already heard from some companies: that the U.S.’s economic nosedive has introduced incredible real estate opportunities. Chipotle CEO Brian Niccol told us that, despite Chipotle’s revenue being down by 5% since 2019, it’s an ideal time to expand, and the company’s dependable reputation makes it an enticing client to landlords. Niccol suggested that you will soon see Chipotles in higher-end locations than you would have thought possible, as the company plans to seize an uncertain market to make lemonade out of lemons.
As for Ingka’s new San Francisco mall, it will have to overcome not just five years of vacancy by the time it opens, but a city that’s full of companies and employees who are questioning their very decision to be in the Bay Area in the first place.