Exclusive: San Francisco's historic Palace Hotel is getting a new fashion retailer
Apparel brand ZastaStudio is opening a pop-up store at the Palace Hotel, moving into the former longtime home of The Rafael's, a women's clothing store that closed after more than 32 years in the location.
The three-month, rent-free lease was subsidized by the city's Vacant to Vibrant Program. The store is holding a soft opening at 643 Market St. on April 24.
ZastaStudio, which specializes in leather jackets and denim made with recycled materials, closed its original location at 1764 Haight St. in January when its lease expired.
"We were looking for a change," said Pankaj Arya, co-founder of ZastaStudio. "Downtown was a huge plus."
"Joining Vacant to Vibrant feels especially meaningful because we share a similar belief in transformation - turning what might otherwise be overlooked or forgotten into something purposeful, beautiful and full of new life." he said.
With fewer people working from home and more tourists, Arya is hopeful for strong exposure and sales.
ZastaStudio joins dozens of new retailers opening in downtown San Francisco, which is seeing an influx of small business owners benefitting from lower rents and city subsidies.
"The last six months have been a pretty amazing time for downtown San Francisco," said Ali McEvoy, a broker at Maven Commercial, who is the Palace's retail leasing agent. "It's not chains. It's local entrepreneurs."
Maven's other recent leases include Café Nagomi and Bora Bora Smoothie Café at 74 New Montgomery St., which is next to the Palace Hotel; Street Taco at nearby 126 New Montgomery St.; coin auctioneer Stack's Bowers at 333 Pine St.; and X Core at 28 2nd St., among others.
Downtown retail asking rents vary widely, but currently range roughly from $45 to $65 per square foot annually, McEvoy said. That's compared to some asking rents over $100 per square foot before the pandemic.
Arya said Vacant to Vibrant provided an opportunity to open in one of San Francisco's iconic hotels for a small business that would be otherwise unable to afford it. Before the pandemic, The Rafael's paid $25,000 a month for the same space.
The store is already furnished and ready for a move in, Arya said. He plans to hire two staff members, in addition to himself, to work at the store.
McEvoy is continuing to market ZastaStudio's space to long-term tenants, along with two other retail vacancies at the Palace Hotel.
One of those vacancies is next to ZastaStudio at 645 Market St., which was previously leased by pen store Lamy. The Vacant to Vibrant Program also helped pop up clothing store Fibers of Being occupy the space since November, but the store will close on April 24. Its original location at 645 Divisadero St. remains open.
"There's definitely been a lot more local traffic than I had initially expected" at the Palace Hotel, said Kristiana Sanchez, store manager at Fibers of Being. The store benefitted from big events like the Super Bowl and last year's Christmas tree lighting in Union Square.
The Palace Hotel's third vacancy is a 5,000-square-foot quick service restaurant space, and McEvoy said a tenant has been in talks to lease the space. Corner Bakery was the former tenant and closed right before COVID.
McEvoy said the 1909 hotel is seeing more foot traffic and special events like weddings. Longtime Palace Hotel tenant Ghiradelli Chocolate recently renewed its lease.
"It's next to a transportation hub. You're steps away from Union Square. You're steps away from Moscone Center," she said. "It's a beautiful historic building."
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